A model of (the threat of) counterfeiting

A simple matching-model of money with the potential for counterfeiting is constructed. In contrast to the existing literature, counterfeiting, if it occurred, would be accompanied by two distortions: costly production of counterfeits and harmful effects on trade. However, application of the Cho-Kreps refinement is shown to imply that there is no equilibrium with counterfeiting. If the cost of producing counterfeits is low enough, then there is no monetary equilibrium. Otherwise, there is a monetary equilibrium without counterfeiting.Counterfeits and counterfeiting

Recent Trends in Counterfeiting

Under the Reserve Bank Act 1959, the Reserve Bank has sole authority to issue banknotes in Australia. As such, a key responsibility of the Reserve Bank is to maintain public confidence in banknotes, so that they remain an effective payment mechanism and a secure store of wealth. This article examines how counterfeiting can impact on this confidence, and counterfeiting trends in Australia and overseas. The article also discusses the strategies the Reserve Bank employs to minimise the risks of counterfeiting and maintain public confidence in banknotes.Banknotes; Banknote counterfeiting; Currency

On the threat of counterfeiting

We study counterfeiting of currency in a search–theoretic model of monetary exchange. In contrast to Nosal and Wallace (2007), we establish that counterfeiting does not pose a threat to the existence of a monetary equilibrium; i.e., a monetary equilibrium exists irrespective of the cost of producing counterfeits, or the ease with which genuine money can be authenticated. However, the possibility to counterfeit ?at money can affect its value, velocity, output and welfare, even if no counterfeiting occurs in equilibrium. We provide two extensions of the model under which the threat of counterfeiting can materialize: counterfeits can circulate across periods, and sellers set terms of trades in some matches. Policies that make the currency more costly to counterfeit or easier to recognize raise the value of money and society’s welfare, but the latter policy does not always decrease counterfeiting.Counterfeits and counterfeiting

Counterfeit-Product Trade

We analyze a two-country model of trade in both legitimate and counterfeit products. Domestic firms own trademarks and establish reputations for delivering high-quality products in a steady-state equilibrium. Foreign suppliers export legitimate low-quality merchandise and counterfeits of domestic brand-name goods. Heterogeneous home consumers either purchase low-quality imports or buy brand-name products, rationally expecting some degree of counterfeiting of the latter. We characterize a counterfeiting equilibrium and explore its properties. We describe the positive and normative effects of counterfeiting in comparison with a no-counterfeiting benchmark. Finally, we provide a welfare analysis of border inspection policy and of policy regarding the disposition of counterfeit goods that are confiscated at the border.

Consumers\u27 Awareness and Perceptions of Luxury Counterfeits

Counterfeiting is a global phenomenon. Because counterfeiting has drastically increased over the past several decades, it is easier for consumers to obtain counterfeited merchandise without any penalties. As the seriousness of the issue increases, companies and scholars suggest that consumer education and awareness may reduce the impact of counterfeit manufacturing. Recently, the luxury goods industry has become one market that is highly affected by counterfeiting, due to their popularity with consumers (Phau, Teah, & Lee 2009). Based on a thorough analysis of literature, many factors have been examined that influence consumers’ attitudes and purchasing intentions towards luxury counterfeits. Results show that luxury counterfeit products are purchased because of their low price and the specific characteristics that the genuine luxury brand portrays such as uniqueness and exclusivity. This pilot study presents the topic of luxury counterfeiting, consumers’ awareness and perceptions of counterfeiting, and attitudes and behaviors towards counterfeit products. A survey was conducted on a Mid-southern university campus to measure consumer awareness and perceptions on luxury counterfeits. Three primary factors were measured: awareness of luxury counterfeits, purchase intentions towards counterfeits, and the specific type of luxury counterfeit products owned. Results indicate strong support for the effectiveness of a consumer education seminar on knowledge, attitudes, and planned behavior towards consumption of counterfeit merchandise. No statistical significance between the three variables, participants’ sex, ethnicity, and annual income can be determined due to the low number of respondents. However, the descriptive statistics indicate that further study utilizing a larger population is warranted

The Canadian Experience with Counterfeiting

Counterfeiting poses a significant public policy issue because of the important role that paper money plays in Canada's payments system. Yet the threat of counterfeiting in all economies has increased markedly in the past decade as a result of technological advances to photocopiers and computer printers. An appropriate pubic policy response is thus necessary to maintain the public's continued confidence in the national currency. To assess the threat from counterfeiting, including possible loss of confidence in the currency, estimating the stock of counterfeits circulating is necessary. In this article, Chant proposes a composite method of detecting counterfeits as an effective alternative to existing methods and offers estimates of the extent of counterfeiting Canadian currency for 2001. An Addendum to the article summarizes Chant's methods and updates the calculations to 2003.

Counterfeiting and Public Health

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Counterfeiting and inflation

In this paper I show that a lax anti-counterfeiting policy is inconsistent with price stability. I use a deterministic matching model with no commitment and no enforcement. An intrinsically worthless but perfectly durable object called a ‘note’ can be produced by banks at a given cost, but also by nonbanks at a (possibly) higher cost. Counterfeiting occurs when nonbanks produce notes in equilibrium. When it is cheap for nonbanks to produce notes, or the technology used to detect counterfeits is poor, counterfeits are circulating in equilibrium and trade is only implemented with a growing stock of notes (thus creating inflation). Finally, I show that the highest welfare level is achieved when counterfeiting is costly, or when the detection of counterfeits is of high quality. JEL Classification: D8, E5Counterfeiting, inflation, Limited Commitment, Money

Developing anti-counterfeiting measures: the role of smart packaging

Counterfeiting of food and beverage products is rife and premium brands are often targeted by fraudsters. Such is the case with Scotch whisky, a global, reputable brand revered for its heritage and tradition. Using Scotch whisky as a case study, the aim of this paper is to review existing literature and industry information to determine the market and personal consequences of counterfeiting activities and consider the packaging related anti-counterfeiting measures that can be employed within a wider anti-counterfeiting strategy. A typology of counterfeiting activities is developed including: tear- down counterfeiting, product overruns, malicious activities and document counterfeiting. Anti-counterfeiting measures are used to deter, detect and control counterfeiting activities and different packaging related approaches include the use of smart covert and overt technology. Most smart packaging-related anti-counterfeit technologies are stand-alone systems and this presents a vulnerability. An integrated anti-counterfeiting measures strategy, employed by business, the supply chain and the government is required to reduce the risk of the sale of counterfeit food and beverage products

Handicapping currency design: counterfeit deterrence and visual accessibility in the United States and abroad

Despite the increasing use of electronic payments, currency retains an important role in the payments system of every country. Two aspects of currency usage drive currency design worldwide: deterring counterfeiting and making paper currency accessible to the visually impaired. Further, among the world's currencies, only U.S. banknotes are widely owned and used in transactions outside their country of issue (although the euro also has some external circulation). In this article, we compare and contrast major currencies and their design features. We conclude that the designs of the two most widely used currencies in the world-the U.S. dollar and the euro-have successfully deterred counterfeiting; data on other currencies are not public. We also conclude that, among the world's major currencies, U.S. banknotes have the fewest features to assist the visually impaired.Paper money design ; Coinage ; Counterfeits and counterfeiting