Impacts of Entry by Counterfeiters

Intellectual Property

Article Snapshot


Yi Qian


Quarterly Journal of Economics, Vol. 123, No. 4, pp. 1577-1609, 2008


This paper looks at how firms respond to counterfeiting.

Policy Relevance

To complement weak government enforcement of intellectual property rights, firms take action to reduce counterfeit sales themselves. These actions can be effective, but increase costs and prices.

Main Points

  • Data from Chinese shoe companies between 1993 and 2004 shows how firms responded to the production of counterfeits.

  • Complicating factors included inconsistent government enforcement of laws against counterfeiting, and differences between legitimate firms' relations with government.

  • Low-quality counterfeits encourage authentic producers to improve quality and invest in self-enforcement.

  • Firms tend to vertically integrate (retail distribution and production, for example) and adopt other costly ways of ensuring that authentic shoes reach consumers.

  • Authentic shoe prices tend to increase. Counterfeit sales tend to decrease.

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