英文摘要 |
This paper presents a model of vertical differentiation to anaalyze a domestic firm's counterfeiting behavior in the existence of network effect. We find that the domestic firm's optimal counterfeiting behavior depends on the foreign product's quality as well as the government's trade policy. Even in the absence of law enforcement, free-riding a pioneering product's great reputation is not necessarily profitable. Under protectionism, if the foreign product's quality is relatively low, then the domestic firm tends to be an innovator; otherwise, it tends to be a counterfeiter. This result could explain why the quality of a counterfeit product is often far behind that of a legitimate one as stated in the U.S. House of Representatives Committee on Energy and Commerce (1985). On the other hand, in the case of free trade, counterfeiting is always profitable for a domestic firm. |