ISSN 0253-2778

CN 34-1054/N

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Pricing of conspicuous products in the presence of high-similarity counterfeits

  • School of Management, University of Science and Technology of China, Hefei 230026, China

Cite this:
https://doi.org/10.3969/j.issn.0253-2778.2020.06.008
  • Received Date: 03 January 2020
  • Accepted Date: 06 May 2020
  • Rev Recd Date: 06 May 2020
  • Publish Date: 30 June 2020
    Abstract

  • Abstract

    The conspicuous goods not only meet the functional needs of consumers, but also meet the needs of consumers’ social status. Some consumers, who cannot afford genuine products, seek to satisfy their needs by using counterfeits which is very similar to genuine ones but at a much lower price. Considering the existence of high-similarity counterfeits, the pricing of conspicuous goods was studied. The social utility of conspicuous goods was incorporated into the consumer utility model, and the quality level of counterfeit goods was considered, a pricing game model for genuine and counterfeit manufacturers was constructed to obtain an equilibrium. It was found that in equilibrium, as the degree of conspicuousness increases, the price and demand of genuine and counterfeit goods both increase, but the price gap between counterfeit and genuine goods gradually narrows. It is shown that when the degree of conspicuousness is higher, the counterfeit product poses a greater threat to the authentic product. With the improvement in the quality of counterfeit goods, the price and demand of genuine and counterfeit products are not monotonous. In particular, as the level of imitation quality rises, there is a case where the demand for genuine products rises and the demand for counterfeit goods decreases. This shows that under certain circumstances, the market demand for genuine products increases as the level of imitation quality rises. In addition, the impact of the entry of counterfeit products on genuine products was analyzed by comparing with the case where counterfeit products do not exist. The entry of counterfeit products into the market leads to a decline in the price and profit of genuine products, but the market demand for genuine products may actually increase under certain circumstances. When the degree of conspicuousness is higher and the quality of imitation is higher (the imitation cost efficiency is higher than a certain value), the profit loss of the genuine product is the largest.

    Abstract

    The conspicuous goods not only meet the functional needs of consumers, but also meet the needs of consumers’ social status. Some consumers, who cannot afford genuine products, seek to satisfy their needs by using counterfeits which is very similar to genuine ones but at a much lower price. Considering the existence of high-similarity counterfeits, the pricing of conspicuous goods was studied. The social utility of conspicuous goods was incorporated into the consumer utility model, and the quality level of counterfeit goods was considered, a pricing game model for genuine and counterfeit manufacturers was constructed to obtain an equilibrium. It was found that in equilibrium, as the degree of conspicuousness increases, the price and demand of genuine and counterfeit goods both increase, but the price gap between counterfeit and genuine goods gradually narrows. It is shown that when the degree of conspicuousness is higher, the counterfeit product poses a greater threat to the authentic product. With the improvement in the quality of counterfeit goods, the price and demand of genuine and counterfeit products are not monotonous. In particular, as the level of imitation quality rises, there is a case where the demand for genuine products rises and the demand for counterfeit goods decreases. This shows that under certain circumstances, the market demand for genuine products increases as the level of imitation quality rises. In addition, the impact of the entry of counterfeit products on genuine products was analyzed by comparing with the case where counterfeit products do not exist. The entry of counterfeit products into the market leads to a decline in the price and profit of genuine products, but the market demand for genuine products may actually increase under certain circumstances. When the degree of conspicuousness is higher and the quality of imitation is higher (the imitation cost efficiency is higher than a certain value), the profit loss of the genuine product is the largest.
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    • References(20)
  • [1]
    VEBLEN T. The Theory of the Leisure Class: An Economic Study of Institutions[M]. London: Unwin Books, 1899.
    [2]
    央视网.案值近18亿，跨国制售假包服饰案告破[Z/OL].[2020-01-01].http://tv.cctv.com/2019/11/18/VIDE1kyOnUfMIUsnnXYMTITS191118.shtml.
    [3]
    HENNIGS N, WIEDMANN K P, KLARMANN C, et al. When the original is beyond reach consumer perception and demand for counterfeit luxury goods in Germany and South Korea[J]. Luxury Research, 2015, 1(1): 58-75.
    [4]
    PEREZ M E, CASTAO R, QUINTANILLA C. Constructing identity through the consumption of counterfeit luxury goods[J]. Qualitative Market Research, 2010, 13(3): 219-235.
    [5]
    ERGIN E A. The rise in the sales of counterfeit brands: The case of Turkish consumers [J]. African Journal of Business Management, 2010, 4(10): 2181-2186.
    [6]
    JIANG L, COVA V. Love for luxury, preference for counterfeits: A qualitative study in counterfeit luxury consumption in China[J]. International Journal of Marketing Studies, 2012, 4(6): DOI 10.5539/ijms.v4n6p1.
    [7]
    CORDELL V V, WONGTADA N, KIESCHNICK R L. Counterfeit purchase intentions: Role of lawfulness attitudes and product traits as determinants[J]. Journal of Business Research, 1996, 35(1): 41-53.
    [8]
    CHO S, FANG X, SRIDHAR T. Combating strategic counterfeits in licit and illicit supply chains[J]. Manufacturing and Service Operations Management, 2015, 17(3): 273-289.
    [9]
    GAO S Y, LIM W S, TANG C S. Entry of copycats of luxury brands[J]. Marketing Science, 2017, 36(2): 272-289.
    [10]
    AMALDOSS W, JAIN S. Conspicuous consumption and sophisticated thinking[J]. Management Science, 2005, 51(10): 1449-1466.
    [11]
    RAO R S, SCHAEFER R. Conspicuous consumption and dynamic pricing[J]. Marketing Science, 2013, 32(5): 786-804.
    [12]
    CORNEO G, JEANNE O. Snobs, bandwagons, and the origin of social customs in consumer behavior[J]. Journal of Economic Behavior & Organization, 1997, 32(3): 333-347.
    [13]
    TEREYAGˇOGˇLU N, VEERARAGHAVAN S. Selling to conspicuous consumers: Pricing, production, and sourcing decisions[J]. Management Science, 2012, 58(12): 2168-2189.
    [14]
    AMALDOSS W, JAIN S. Pricing of conspicuous goods: A competitive analysis of social effects[J]. Journal of Marketing Research, 2005b, 42(1): 30-42.
    [15]
    AMALDOSS W, JAIN S. Branding conspicuous goods: An analysis of the effects of social influence and competition[J]. Management Science, 2015, 61(9): 2064-2079.
    [16]
    BALACHANDER S, STOCK A. Limited edition products: When and when not to offer them[J]. Marketing Science, 2009, 28(2): 336-355.
    [17]
    邵晓双,谭德庆. 社会地位效用及城市交通状况对私家车厂商市场策略的影响[J]. 中国管理科学, 2016, 24(8):37-44.
    [18]
    刘园, 李捷嵩. 居民收入分布与炫耀性消费[J]. 中央财经大学学报, 2018(1): 77-86.
    [19]
    马永斌, 董伶俐. 产品炫耀性如何影响仿冒轻奢侈品选择?——基于“态度功能理论”视角[J]. 财经论丛, 2018, 229(1):99-107.
    [20]
    KAPFERER J N, VALETTE-FLORENCE P. The impact of brand penetration and awareness on luxury brand desirability[J]. Journal of Business Research, 2018, 83: 38-50.
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    [1]
    VEBLEN T. The Theory of the Leisure Class: An Economic Study of Institutions[M]. London: Unwin Books, 1899.
    [2]
    央视网.案值近18亿，跨国制售假包服饰案告破[Z/OL].[2020-01-01].http://tv.cctv.com/2019/11/18/VIDE1kyOnUfMIUsnnXYMTITS191118.shtml.
    [3]
    HENNIGS N, WIEDMANN K P, KLARMANN C, et al. When the original is beyond reach consumer perception and demand for counterfeit luxury goods in Germany and South Korea[J]. Luxury Research, 2015, 1(1): 58-75.
    [4]
    PEREZ M E, CASTAO R, QUINTANILLA C. Constructing identity through the consumption of counterfeit luxury goods[J]. Qualitative Market Research, 2010, 13(3): 219-235.
    [5]
    ERGIN E A. The rise in the sales of counterfeit brands: The case of Turkish consumers [J]. African Journal of Business Management, 2010, 4(10): 2181-2186.
    [6]
    JIANG L, COVA V. Love for luxury, preference for counterfeits: A qualitative study in counterfeit luxury consumption in China[J]. International Journal of Marketing Studies, 2012, 4(6): DOI 10.5539/ijms.v4n6p1.
    [7]
    CORDELL V V, WONGTADA N, KIESCHNICK R L. Counterfeit purchase intentions: Role of lawfulness attitudes and product traits as determinants[J]. Journal of Business Research, 1996, 35(1): 41-53.
    [8]
    CHO S, FANG X, SRIDHAR T. Combating strategic counterfeits in licit and illicit supply chains[J]. Manufacturing and Service Operations Management, 2015, 17(3): 273-289.
    [9]
    GAO S Y, LIM W S, TANG C S. Entry of copycats of luxury brands[J]. Marketing Science, 2017, 36(2): 272-289.
    [10]
    AMALDOSS W, JAIN S. Conspicuous consumption and sophisticated thinking[J]. Management Science, 2005, 51(10): 1449-1466.
    [11]
    RAO R S, SCHAEFER R. Conspicuous consumption and dynamic pricing[J]. Marketing Science, 2013, 32(5): 786-804.
    [12]
    CORNEO G, JEANNE O. Snobs, bandwagons, and the origin of social customs in consumer behavior[J]. Journal of Economic Behavior & Organization, 1997, 32(3): 333-347.
    [13]
    TEREYAGˇOGˇLU N, VEERARAGHAVAN S. Selling to conspicuous consumers: Pricing, production, and sourcing decisions[J]. Management Science, 2012, 58(12): 2168-2189.
    [14]
    AMALDOSS W, JAIN S. Pricing of conspicuous goods: A competitive analysis of social effects[J]. Journal of Marketing Research, 2005b, 42(1): 30-42.
    [15]
    AMALDOSS W, JAIN S. Branding conspicuous goods: An analysis of the effects of social influence and competition[J]. Management Science, 2015, 61(9): 2064-2079.
    [16]
    BALACHANDER S, STOCK A. Limited edition products: When and when not to offer them[J]. Marketing Science, 2009, 28(2): 336-355.
    [17]
    邵晓双,谭德庆. 社会地位效用及城市交通状况对私家车厂商市场策略的影响[J]. 中国管理科学, 2016, 24(8):37-44.
    [18]
    刘园, 李捷嵩. 居民收入分布与炫耀性消费[J]. 中央财经大学学报, 2018(1): 77-86.
    [19]
    马永斌, 董伶俐. 产品炫耀性如何影响仿冒轻奢侈品选择?——基于“态度功能理论”视角[J]. 财经论丛, 2018, 229(1):99-107.
    [20]
    KAPFERER J N, VALETTE-FLORENCE P. The impact of brand penetration and awareness on luxury brand desirability[J]. Journal of Business Research, 2018, 83: 38-50.
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