Via Eli Dourado, an article in Slate by Ray Fisman on how counterfeit handbags are the gateway to the real thing.

Yet a preliminary studyfocused on counterfeit sales in China—the source of all those fake handbags in Chinatown and just about everywhere else—suggests that in many cases the sale of fakes may not be so bad for legitimate brands. The study, by Northwestern economist Yi Qian, examined the counterfeit market in the wake of well-publicized cases of food poisoning and exploding gas tanks in China, when enforcement efforts were diverted from policing fashion copycats and toward monitoring drugs, food, and gas. Counterfeit factories flourished, but surprisingly, this led to an increase in sales for high-end products in the years that followed.

Here’s one model.  A fake raises your status among everyone who’s fooled. How much is that boost in status worth?  Reducing enforcement makes it cheaper to buy a fake and find out.  Some will learn that it’s worth more than they thought. But since not everyone is fooled by a fake they are nowwilling to pay more for the real thing to increase status on the extensive margin.  These people would not have bought Prada without having first experimented with the cheap fake.

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