Counterfeiting acts as testing for legitimate products increase sales for businesses.

While firms are often unsuccessfully struggling with counterfeiting, however, some researchers have examined with cautions the possibility that firms might benefit from counterfeits because consumers of counterfeits might become buyers of genuine items. Such a possibility was examined, in particular, in computer software piracy. For example, Conner and Rumelt (1991) argued that piracy increases the number of program users, and the existence of pirated software stimulates an interest in legal copies. In conclusion, they objected to software protection because it decreases the number of users. Givon, Mahajan, and Muller (1995) found that the sales of genuine word processors and spreadsheets in the United Kingdom significantly increased because of active word-of-mouth resulting from pirates. Furthermore, Maltz and Chiappetta (2002) object to eliminating software pirates because they can help firms identify useful technologies.

Two questions arise from the studies of software piracy. First, can the same findings be found in other product categories, especially luxury fashion product categories, which are the 3 biggest counterfeit item categories? For example, in the UK, more than 64 per cent of the UK Customs seizure cases were fashion products, and of these cases, 17.5 per cent were fake Louis Vuitton goods (The Financial Times 2005). Likewise, the U.S. Customs and Border Protection reports fashion products as a major product type of counterfeiting. Second, pirated software functions in exactly the same way as the genuine item, but counterfeited fashion products do not. They are more often disposable, fall apart, and are inferior in all aspects except for brand name, although the quality of some counterfeits can be occasionally as high as that of the genuine items (Gentry et al. 2001). Therefore, it will be important to investigate whether or not counterfeiting of fashion products helps the sales of genuine items, as observed in the case of software piracy.

The purpose of our study is to examine the effect of counterfeit fashion products on the sales of genuine items. In this study, we argue that presence of counterfeits is more likely to help consumers to desire possessing genuine items rather than counterfeits. Firms will accordingly have more revenue gains than losses. Therefore, firms need not be eager to eradicate counterfeiting. Instead, they may welcome and capitalize on counterfeits because counterfeit items function as a promotion for genuine items, and this way, counterfeit items take the role of the cheapest way of promotion. In the study, we narrowly define consumers of counterfeits as consumers who are not deceived by counterfeiters but knowingly purchase and consume counterfeits. In fact, such nondeceptive consumers of counterfeits comprise the majority of such consumers; they are well aware of unlawful retail outlets selling counterfeits, and the sellers also explicitly inform consumers that they are selling counterfeits (Grossman and Shapiro 1988). Such a market scene is frequently observed in countries that do not enforce copyright laws strictly. In the following sections, we discuss the theoretical rationale for counterfeit consumption behaviors, develop research hypotheses, and test them in two studies of consumers across fashion product categories that are greatly counterfeited. Finally, we discuss the implications of the results.