Luxury products are among the most commonly seized counterfeit items by the U.S. Customs and Border Protection Agency, and the annual confiscation rate continues to increase. Globally, the total costs associated with these counterfeits are estimated to be in the range of billions of dollars, and effect consumers, governments, and producers of the luxury brand items. Despite the attention that this topic has received, the effects of counterfeit use on the sales of genuine luxury brands and consumers’ perceptions are unclear. The authors uncover an interesting asymmetric relationship between the social classes of counterfeit users and those of observers of counterfeit use on perceptions of the original luxury brand. In other words, if a consumer from a high-class background sees a consumer from a lower-class background with a luxury item, the effect is different than when the lower-class consumer sees a consumer from a high-class background with the same luxury brand. The authors predict that counterfeit use can hurt luxury brand equity, although in some cases, it may have no effect. These predictions are based on social hierarchy theory and uncover that consumers’ levels of uncertainty about counterfeit luxury products causes them to rely more on social cues when evaluating luxury products after being exposed to counterfeit use. The managerial implications of three key findings are provided in order to help luxury brand managers determine what action can be taken in markets where there is significant counterfeit activity.
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