Friday, June 29, 2012

So you want to buy a fake Louis Vuitton?

Good morning economists! After a rather lengthy discussion with colleagues and loved ones, today we will talk about the phenomenon of people buying fake designer pieces. Have you ever seen someone holding a designer bag that you or your friends deemed to be fake?

The rise of the "fakes" market is a fact and I will admit, it is flourishing in times of recession. People buy fake to satisfy their personal need of owning designer products. But what are the factors that determine this need and should people even consider buying designer fakes?

For the purposes of this discussion, I will employ game theory. In economics we consider that for every action there is a reaction with a perceived payoff (enjoyment). In the case of fakes the reaction is the perception of society about the person carrying the fake designer handbag. Let us take things from the beginning.

Two dimensions will be discussed today. The first dimension is the human need to purchase a fake handbag.This need can be broken down in two factors: taste and showing off. The factor of taste is very subjective and can differ dramatically based on the individual. There are people that will want to buy a fake purely for functional purposes and do not care about showing off. This factor escapes the purpose of this post so I will not discuss it any further.

Showing off on the other hand, is a different story. This factor represents the people who hold fakes with the hope of capturing attention and admiration from the people around them. They believe that the fake can add to their social status.



The second dimension to determine the purchase of a fake is social status. Social status can be divided in two broad categories: high and low. People with high social status are the rich.These are the people who can afford both originals and fakes. People with low social status are the relatively poor. These are the people who can afford fakes and perhaps, after lengthy savings, they may be able to afford an original.

For the purposes of this discussion I will assume that the proportion of people in society who can tell the fake from an original is extremely small and cannot affect the social payoff. 


Factors (Social Status, Need to buy)
Taste
Showing off
High

100
Low

-100

Consider for a moment the table above. The numbers under the showing off column represent the perceived social utility (enjoyment) for purchasing a fake. In other words the numbers show how society will accept the purchase. Afterall, the initial reason for the purchase of the fake is showing off.

When high status people buy fakes, society reacts by deeming the fakes to be originals. This is because society judges people based on past experience and social status. Even a fake will add to the status of the wealthy because society will reject the idea of the rich purchasing a fake. (This is afterall the reason for the scandal with wealthy ladies purchasing fakes in Nicosia three months ago).

Unfortunately, lower status people will be judged harshly by society. Even when an original designer piece is bought, society will deem it to be a fake. This is because raising one's social status is extremely difficult. Notice the negative perceived utility (or disutility) from the table above. This arises from the fact that no matter original or fake, society will be unwilling to accept a change of status. Gossips will be flying left and right about how fake the designer piece is, even though it may, in fact, be an original.

Have you heard the saying it is not the clothes that make the person, but rather the person that makes the clothes?

The outcome of this discussion is that in general the lower status people should avoid buying fakes for the purpose of showing off since they are judged more harshly than the higher status people. Sad, but true. A reminder that purchasing a fake because of functionality or other purpose that involves personal tastes is an entirely different story that will be discussed in a future post.

So next time you are considering purchasing a fake, think twice! 

Have a high utility day!


6 comments:

  1. Unfortunately, the majority of Cypriot women use to buy fake bags not for the style of the bag but because of the logo or the brand. They do not even know the history or the designer of the bag. In my opinion such behavior it is a shame besause they abuse the name of each fashion house.

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  2. That is correct Andrea. I totally agree. Showing off sometimes might actually be harmful for a person as can be seen from the post above.

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  3. Sometimes people can't afford the real thing.....

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  4. There are plenty of ladies bags at other more affordable stores like Zara. Think about this...what is better? To buy a fake designer bag or a cheaper affordable bag? And in the end are you really fooling anyone? Something to consider.

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  5. wow. this actually makes sense. never thought about it. great article!

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