How does the fashion industry work without copyright?

Scott Cunningham directs our attention to "The Piracy Paradox," a new law and economics paper on the economics of fashion.  The authors argue that the fashion sector has more innovation because of its near-absence of copyright protection.  Here is some brief background on the issue. 

Fashion is a status good.  You wear a new design if some other people do (it must be focal as an object of status), but not if too many other people do.  You want some degree of exclusivity to your wardrobe.  So let's say a new design comes out.  There will be some early adopters, but then a rapid series of rip-offs from other companies.  Once the rip-offs come, companies invest in making further designs.  Fashion is ephemeral and the rip-offs spur the next round of innovation.  (BTW, here is an economic model of innovation in the fashion sector, and here are some common-sense critiques.  Here is a piece on the ethics of fashion copying.)

Ex ante, the companies invest in production capacity.  They don't know if they will be copied or copiers, but the costs and benefits wash to keep normal rates of return.  There is more to the argument but read the paper if you are interested.  By the way, the authors claim that European fashion industries receive much more copyright protection, but do not seem to be more efficient. 

Micro question: For this model to work, what underlying assumptions are needed about the costs of design relative to the dollar flow of fashion demand?  A low ratio of fixed to marginal costs?  A lingering cache from having been the first with a new style?  Here is one unconvincing attempt to answer the question; do tackle this in the comments if you have further ideas.

The authors list a few other areas where copyright protection is weak or non-existent: food recipes, furniture design, tattoos (until recently), trendy hairstyles, and perfume scents.  I would add to the list calligraphy, topiaries (I love that word), and chess games.  The point is not that these can serve as models for the music or movie industries but rather to figure out how they differ and why the absence of IP protection has led to (apparently) acceptable results.

Here is the legal reasoning why fashion is not well-protected.

Kathleen Fasanella, one of my favorite MR readers, directs our attention to this IP-related fashion blog.