Seminar on "Intellectual Property Theft: An Economic Analysis of a Supplier’s Incentive to Copy"

Date: 4 May 2017 (Thu)

Time: 11:00am – 12:00(noon)

Venue: EF619



Dr Hubert Pun

Assistant professor and the PhD program coordinator of the management science area group in the Ivey Business School



Outsourcing can be an integral part of a manufacturer’s strategy.  However, by outsourcing the production of a product a manufacturer distributes its intellectual property (IP) into a supply chain that it may not be able to fully control.  This may lead to copycat products from a third-party or even the manufacturers’ supplier. One solution would be for a manufacturer to sign an IP agreement, although this does not always occur.  In this paper, we study the impact of an IP agreement to illustrate a potential hidden cost from the manufacturer’s perspective. Specifically, using a game-theoretic approach, we consider a system where a manufacturer outsources to a supplier and there is the potential of a copycat product from either the supplier or a third-party. In our model, the supplier or third-party incurs a fixed cost to enter the market with a copycat product while the manufacturer selects the level of marketing investment. The wholesale/retail prices are determined after the supplier and the third-party firm decide whether or not to enter the market. We find that the manufacturer is not always better off signing an IP contract. We find that a low fixed entrance cost is not always beneficial for a supplier. Finally, we find that the manufacturer, the supplier and the customers may all be worse off with the threat of copycat products, so we provide justification towards tighter IP regulation.



Hubert Pun is an assistant professor and the PhD program coordinator of the management science area group in the Ivey Business School (Western University). He graduated from the Kelley School of Business (Indiana University) in 2010, where he completed his PhD in Operations Management and Decision Sciences. His research interests include marketing/operations interface, co-opetitive supply chain management and healthcare operations management, and he has published in Manufacturing & Service Operations Management (M&SOM), Production and Operations Management (POM), European Journal of Operational Research (EJOR), Naval Research Logistics (NRL), Decision Sciences (DS), etc. Currently, he is serving as an associate editor at International Journal of Production Research (IJPR).