Consumers' choices, infringements and market competition

[[abstract]]The study fits the individuals' characteristics of consumption into an analysis of the demands for both genuine goods and counterfeit goods. The consumers' substitutability of genuine goods for counterfeits and attitudes toward a dispersed consumption of counterfeit varieties are the dimensions that affect the niche markets for counterfeits. We show that it is not necessary to increase the competition among counterfeits to reduce the demand for individual counterfeits if at the margin the variety of counterfeits enhances the value of consuming the good. The enforcements against counterfeiting deter the number of counterfeit firms, but encourage the output of individual counterfeits if the market includes a significant number of counterfeiters. The optimal private enforcement against counterfeiting is also fully discussed in the model.[[note]]SSC