Positional Goods, Conspicuous Consumption, and the International Demonstration Effect Considered
Author(s)
James, Jeffrey
Abstract
Poor consumers in the developing world use a variety of status signaling devices that rely on deception of the observer. A frequently used deceptive strategy is the consumption of counterfeit instead of original status-intensive goods, mainly cheap copies of expensive brand-name goods from developed countries. The choice for such deceptive modes of conspicuous consumption is analyzed within a product characteristics approach as developed by Lancaster and compared with non-deceptive alternatives. Under the controversial assumption that the poor care about status, it is shown that counterfeit goods embody a more appropriate combination of status and functionality than original goods. It appears that the consumption of counterfeits potentially enhances the welfare of low-income consumers, depending on the extent to which the eye of the relevant beholder is effectively deceived.
