Marketing Department's Lecture

Theme：Optimal Channel Strategy of Luxury Brands in the Presence of Online Marketplace and Counterfeits

Speaker：Ziqiu Ye (National University of Singapore)

Time：2019-11-07 14:00

Address：Room 706, Mingde Business Building

Language：English/Chinese

Abstract：

Rapid expansion of the online marketplace (such as Taobao.com) in the developing economies has led to many firms leveraging on this new channel to increase their access to consumers. Yet, it is also one of the main propagators of counterfeits of luxury brands. Using a dynamic game-theoretic framework, we show that the authentic luxury brand shares the same channel on the online marketplace with the counterfeits when it has a relatively low production cost but a high direct channel operating cost. This is particularly when the counterfeit is sufficiently differentiated from the authentic product in terms of low physical resemblance and low quality. Equivalently, the counterfeit firm can discourage the authentic firm from the online marketplace by positioning counterfeits as close substitutes either with a high level of physical resemblance or quality. The presence of the online marketplace thus offers an alternative explanation for the increasing quality of counterfeits in recent years. Our findings suggest that the authentic firm sets up its direct online channel to counter the prevalence of counterfeits in online marketplaces. Finally, the authentic luxury brand’s consideration of the online marketplace as a potential channel improves consumer surplus when the counterfeit is a sufficiently close substitute to the authentic luxury brand. This is because consumers enjoy comparable consumption or status utility from either products at competitive prices.

Keywords：

Conspicuous consumption, luxury brands, counterfeits, online marketplace, channels

Short biography：

Ziqiu Ye is a Ph.D. student in the Department of Economics at the National University of Singapore. Her primary research interests lie in the domain of quantitative marketing and she is particularly interested in research questions enabled by technological advancements. To address the questions of her interests, she has been relying on both analytical frameworks and empirical methodologies. Particular markets she is currently studying include electronic journals in scientific publishing, e-commerce with conspicuous consumption, sharing economy and crowdfunding platform.