Anti-Counterfeiting in a retail Platform: A Game-Theoretic approach

The retail platform has developed rapidly, but the problem of fake products has also become increasingly severe. This paper investigates the impact of anti-counterfeiting in a retail platform and the incentives for the platform and the manufacturer to invest in anti-counterfeiting technology by using a game-theoretic model. We consider that the product can be sold directly by the manufacturer, or indirectly through a reseller on the platform. The reseller might also sell fake products, but the platform and the manufacturer can use anti-counterfeiting technology to fight against the fakes. Our analysis shows that the payoff of anti-counterfeiting in the retail platform is not always positive. Specifically, when the production valuation is low, the anti-counterfeiting payoff for the platform (the manufacturer) is negative if the proportion of fakes is sufficiently low (high). We also find that anti-counterfeiting may harm consumer surplus and social welfare. In addition, if the investment cost of anti-counterfeiting is high, at most one firm, either the platform or the manufacturer, has the incentive to invest in anti-counterfeiting contingent on the relative valuation on the platform's services. Finally, with the investment in anti-counterfeiting, the platform should provide better services than before for surviving in the market.