Living Economics

It is not uncommon for high-end fashion designers to sell customized limited-edition dresses at thousands of dollars each worn by celebrities. But the same red-carpet and runway looks will soon be followed by knockoffs more affordable to the masses.

Knockoffs essentially shorten the product life cycle of fashions and transfer the potential economic surplus through sequential price discrimination from the originators to the imitators.

It is questionable that the high-end designers really intend to tap the mass market at all. Directly tapping the mass market would cheapen the brand names of the high-end designers. So the loss of potential economic surplus through price discrimination is a moot point. But wouldn't third-party knockoffs cheapen the brands anyway? Probably not. It is most unlikely that the people who wear the knockoffs will show up in the same social occasions as the celebrities wearing the originals. Moreover, how many celebrities would wear the same outfit twice?

Far from being hurt by knockoffs, it is arguable that those high-end fashion designers whose works are never copied might not stay on top too long. After all, how can a fashion become a trend setter if no one follows it? High-end fashion designers would be hurt only if the celebrities stop buying limited-edition dresses from them.

On the other hand, fashion designers who target only the high-end mass market and leave the middle and low-end of the mass markets untapped are inviting knockoff competition themselves. For products with very short product life cycles such as fashions, the different market segments must be exploited simultaneously if the potential economic surplus through price discrimination is to be captured. The recent extension of Vera Wang, the well-known bridal-gown and ready-to-wear fashion designer, into high-volume licensing under a slightly different brand with Kohl's Corp. is an attempt to tap multiple ends of the market. Many high-end fashion houses such as Giorgio Armani and Prada are also expanding into higher-volume lines under cheaper labels.

Short product life cycles in fashion also make it moot to grant copyright to fashions. Any legal remedies are likely to come too late to be practical. This is especially true when the imitators, such as Zara and H&M, are more fleet-footed than the high-end designers.