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 with 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.