The Economics of Counterfeiting

Authors

Elena Quercioli, The University of Texas Rio Grande ValleyFollow
Lones Smith, University of Wisconsin - Madison

Document Type

Article

Publication Date

6-8-2015

Abstract

We develop a strategic theory of counterfeiting as a multi-market large game. Bad guys choose whether to counterfeit, and what quality to produce. Opposing them is a continuum of good guys who select a costly verification effort. In equilibrium, counterfeiters produce better quality at higher notes, but verifiers try sufficiently harder that verification still improves. We develop a graphical framework for deducing comparative statics. Passed and counterfeiting rates vanish for low and high notes. Our predictions are consistent with time series and cross-sectional patterns in a unique data set assembled largely from the Secret Service

Comments

© 2015 The Econometric Society. Original published version available at https://doi.org/10.3982/ECTA10975.

Recommended Citation

Quercioli, Elena, and Lones Smith. “The Economics of Counterfeiting.” Econometrica 83, no. 3 (June 8, 2015): 1211–36. https://doi.org/10.3982/ECTA10975.

First Page

1211

Last Page

1236

Publication Title

Econometrica

DOI

10.3982/ECTA10975