Fooling the Eye of the Beholder: Deceptive Status Signalling among the Poor in Developing Countries

Poor consumers in the developing world use a variety of status signalling devices that rely on deception of the observer. A frequently used deceptive strategy is the consumption of counterfeit instead of original status-intensive goods, mainly cheap copies of expensive brand-name goods from developed countries. The choice for such deceptive modes of conspicuous consumption is analysed within a product characteristics approach as developed by Lancaster and compared to non-deceptive alternatives. Under the controversial assumption that the poor care about status, it is shown that counterfeit goods embody a more ‘appropriate’ combination of status and functionality than original goods. It appears that the consumption of counterfeits potentially enhances the welfare of low-income consumers, depending on the extent to which the eye of the relevant beholder is effectively deceived. * Department of Economics and CentER, Tilburg University. I am heavily indebted to Jeffrey James, who provided many of the ideas for this paper. I also thank Jeroen van de Ven, Sjak Smulders and Wim Pelupessy for valuable comments on an earlier draft. Address: Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands. E-mail: [email protected].