Piracy versus monopoly in the market for conspicuous consumption
Economics
Speaker: | Michael Mandler, Royal Holloway University of London |
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Date: | Friday 4 October 2013 |
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Time: | 16.15 - 17.45 |
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Location: | Bateman Lecture Theatre, Building One, Streatham Campus |
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Further details
When luxury purchases signal buyers’ incomes, a monopoly provider of a luxury
good can deliver the signals with greater efficiency than competitive providers. If
new entrants sell counterfeit goods at competitive prices, consumers will have to
buy larger quantities of luxury goods to transmit the same signal, thereby creating
inefficiency. And new entrants will in fact cause competitive prices to prevail when
they produce indistinguishable replicas of existing luxury goods. If new entrants are
prohibited from producing exact copies, welfare performance can be better. We also
find a trade-off among the goods that can serve as income signals: the goods that
signal efficiently display a large gap between between marginal cost and the price a
monopoly charges, but the same goods offer the greatest rewards to counterfeiting.