The upside of uncertainty: how counterfeit risk in secondary markets influences primary luxury sales

Abstract

The rise of digital resale platforms has reshaped the global luxury goods market, creating opportunities for pre-owned luxury transactions while introducing significant authenticity challenges. We argue that increased uncertainty about product authenticity in the secondhand market can benefit primary market sales. Drawing on concepts from information asymmetry and cross-market spillovers, we propose a novel inverted U-shaped relationship between counterfeit-related uncertainty and primary market demand. Two experimental studies tested this hypothesis by measuring participants’ intention to purchase from the primary market, the secondary market, or opting out altogether. The findings reveal that moderate authenticity uncertainty in the secondhand market drives consumers toward the primary market, where authenticity is guaranteed. However, as perceived uncertainty reaches extreme levels, consumers either exit the market or revert to secondhand purchases despite known risks. This cross-market mechanism, where secondary market uncertainty influences primary market sales, challenges traditional views that counterfeits only damage brands through direct competition. This study contributes to theory by (1) extending Akerlof’s information asymmetry framework to cross-market contexts, (2) identifying conceptual boundary conditions where uncertainty creates value rather than destroys it, and (3) challenging the prevailing assumption that counterfeits are categorically harmful to luxury brands. These insights further suggest that luxury brands might benefit from balancing their anti-counterfeiting efforts: reducing uncertainty enough to prevent trust erosion while maintaining some ambiguity to redirect demand toward primary channels.