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Piracy and the Legitimate Demand for Recorded Music

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Author Info
Kai-Lung Hui (National University of Singapore)
Ivan Png (National University of Singapore)

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Abstract

Publishers of computer software and music claimed losses of over $17.6 billion to piracy in 2002. Theoretically, however, piracy may raise legitimate demand through positive demand-side externalities, sampling, and sharing. Accordingly, the actual impact of piracy on the legitimate demand is an empirical issue. Addressing this issue in the context of recorded music, we develop and test hypotheses from theoretical models of piracy on international data for music CDs over the period 1994-98. Empirically, we find that the demand for music CDs decreased with piracy, suggesting that "theft" outweighed the "positive" effects of piracy. However, the impact of piracy on CD sales was considerably less than estimated by industry. We estimated that, in 1998, actual losses amounted to about 6.6% of sales, or 42% of industry estimates. But, we found evidence that publishers would have raised prices in the absence of piracy, suggesting that the actual revenue loss would have been higher.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Contributions to Economic Analysis & Policy.

Volume (Year): 2 (2003)
Issue (Month): 1 ()
Pages: 1160-1160
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Handle: RePEc:bep:eapcon:v:2:y:2003:i:1:p:1160-1160

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Related research
Keywords: piracy copyright music

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Find related papers by JEL classification:
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bakos, Yannis & Brynjolfsson, Erik & Lichtman, Douglas, 1999. "Shared Information Goods," Journal of Law & Economics, University of Chicago Press, vol. 42(1), pages 117-55, April.
  2. Liebowitz, S J, 1985. "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 945-57, October. [Downloadable!] (restricted)
  3. Neil Gandal & Michael Kende & Rafael Rob, 2000. "The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players," RAND Journal of Economics, The RAND Corporation, vol. 31(1), pages 43-61, Spring.
  4. Varian, Hal R, 2000. "Buying, Sharing and Renting Information Goods," Journal of Industrial Economics, Blackwell Publishing, vol. 48(4), pages 473-88, December. [Downloadable!] (restricted)
  5. Oz Shy & Jacques-Françlois Thisse, 1999. "A Strategic Approach to Software Protection," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 8(2), pages 163-190, 06. [Downloadable!] (restricted)
  6. Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Blackwell Publishing, vol. 42(2), pages 155-66, June. [Downloadable!] (restricted)
  7. Besen, Stanley M., 1986. "Private copying, reproduction costs, and the supply of intellectual property," Information Economics and Policy, Elsevier, vol. 2(1), pages 5-22. [Downloadable!] (restricted)
  8. Burnkrant, Robert E & Cousineau, Alain, 1975. " Informational and Normative Social Influence in Buyer Behavior," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 2(3), pages 206-15, December.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ivan Png, 2006. "Copyright: A Plea for Empirical Research," Levine's Working Paper Archive 321307000000000484, UCLA Department of Economics. [Downloadable!]
  2. Peitz, Martin & Waelbroeck, Patrick, 2004. "The Effect of Internet Piracy on CD Sales: Cross-Section Evidence," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  3. Rafael Rob & Joel Waldfogel, 2004. "Piracy on the High C's: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students," NBER Working Papers 10874, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Rafael Rob & Joel Waldfogel, 2006. "Piracy on the Silver Screen," NBER Working Papers 12010, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Gil, Ricard, 2006. "The economics of IPR protection policies," IESE Research Papers D/622, IESE Business School. [Downloadable!]
  6. Michele Boldrin & David K Levine, 2006. "Perfectly Competitive Innovation," Levine's Working Paper Archive 618897000000000954, UCLA Department of Economics. [Downloadable!]
    Other versions:
  7. Alejandro Zentner, 2005. "File Sharing and International Sales of Copyrighted Music: An Empirical Analysis with a Panel of Countries," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 5(1), pages 1452-1452. [Downloadable!] (restricted)
  8. Ricard Gil, 2006. "The Economics of IPR Protection Policies," Review of Network Economics, Concept Economics, vol. 5(3), pages 299-319, September. [Downloadable!]
  9. Patrick Legros, 2005. "Art and the Internet: Blessing the Curse?," Levine's Bibliography 666156000000000502, UCLA Department of Economics. [Downloadable!]
    Other versions:
  10. Zorina Khan, 2008. "La piratería de derechos de autor y el desarrollo: evidencia de los Estados Unidos en el siglo XIX," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 10(18), pages 21-54, January-J. [Downloadable!]
  11. Danny Ben-Shahar & Assaf Jacob, 2004. "Selective Enforcement of Copyright as an Optimal Monopolistic Behavior," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), pages 1189-1189. [Downloadable!] (restricted)
  12. Braunerhjelm, Pontus, 2005. "Madonna and the Music Miracle The genesis and evolution of a globally competitive cluster," Working Paper Series in Economics and Institutions of Innovation 29, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
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