Trademark infringement and optimal monitoring policy

Yosef Mealem, Yacov Yacobi, Gideon Yaniv

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


The paper addresses a trademark infringer who seeks to capitalize on the reputation of a trademark owner, sells an identical product under a trademark which is confusingly similar to that of the owner, charges the same price and competes with him in the same market. We show that the welfare-maximizing monitoring intensity is zero, hence the government is not likely to engage in monitoring infringement. Recognizing this, the trademark owner may consider monitoring the market himself, discovering, however, that this is worth his while only if the penalty for infringement, which he fully collects, is sufficiently high. Given the entry condition, an increase in the penalty may either raise or lower the optimal monitoring intensity. In the former case it will counter-intuitively increase the infringer's expected profit, apparently because a higher penalty will also lead to a raise in price. While monitoring enables the trademark owner to maintain a positive profit level, it reduces social welfare. The government may intervene to eliminate the private incentive for monitoring through taxing the collected penalty.

Original languageEnglish
Pages (from-to)116-128
Number of pages13
JournalJournal of Economics and Business
Issue number2
StatePublished - 2010
Externally publishedYes


  • Optimal monitoring
  • Perfect counterfeiting
  • Social welfare
  • Trademark infringement
  • Trademark owner


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