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Piracy and Competition

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  • Paul Belleflamme
  • Pierre M. Picard

Abstract

"The effects of (private, small-scale) piracy on the pricing behavior of producers of information goods are studied within a unified model of vertical differentiation. Although information goods are assumed to be perfectly differentiated, demands are interdependent because the copying technology exhibits increasing returns to scale. We characterize the Bertrand-Nash equilibria in a duopoly. Comparing equilibrium prices to the prices set by a multiproduct monopolist, we show that competition drives prices up and may lead to price dispersion. Competition reduces total surplus in the short run but provides higher incentives to create in the long run." Copyright 2007, The Author(s) Journal Compilation (c) 2007 Blackwell Publishing.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 16 (2007)
Issue (Month): 2 (06)
Pages: 351-383

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Handle: RePEc:bla:jemstr:v:16:y:2007:i:2:p:351-383

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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References

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  1. Michael Smith & Erik Brynjolfsson, 1999. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Computing in Economics and Finance 1999 1022, Society for Computational Economics.
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  17. BELLEFLAMME, Paul & PICARD, Pierre M., 2004. "Competition over piratable goods," CORE Discussion Papers 2004055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  20. Ganesh Iyer & Amit Pazgal, 2003. "Internet Shopping Agents: Virtual Co-Location and Competition," Marketing Science, INFORMS, vol. 22(1), pages 85-106, November.
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Citations

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Cited by:
  1. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
  2. Francesco BALDUCCI, 2010. "The Web's Promotional Effect and Artists' Strategies," Working Papers 345, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  3. Francisco Martinez-Sanchez, 2011. "Collusion, competition and piracy," Applied Economics Letters, Taylor & Francis Journals, vol. 18(11), pages 1043-1047.
  4. Francisco Martinez, 2008. "Learning by Copying," ThE Papers 08/05, Department of Economic Theory and Economic History of the University of Granada..
  5. Alessandro Balestrino, 2007. "It is a Theft but not a Crime," CESifo Working Paper Series 2047, CESifo Group Munich.
  6. Jiri Strelicky & Kresimir Zigic, 2011. "Intellectual Property Rights Protection and Enforcement in a Software Duopoly," CERGE-EI Working Papers wp435, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  7. Berger, Florian & Blind, Knut & Cuntz, Alexander, 2012. "Risk factors and mechanisms of technology and insignia copying—A first empirical approach," Research Policy, Elsevier, vol. 41(2), pages 376-390.
  8. Yuanzhu Lu & Sougata Poddar, 2009. "Accommodation or Deterrence in the Face of Commercial Piracy: the Impact of Intellectual Property Rights (IPR) Protection," CEMA Working Papers 389, China Economics and Management Academy, Central University of Finance and Economics.
  9. Tsai, Ming-Fang & Chiou, Jiunn-Rong & Lin, Chun-Hung A., 2012. "A model of counterfeiting: A duopoly approach," Japan and the World Economy, Elsevier, vol. 24(4), pages 283-291.
  10. Minniti, Antonio & Vergari, Cecilia, 2010. "Turning Piracy into Profits: a Theoretical Investigation," Information Economics and Policy, Elsevier, vol. 22(4), pages 379-390, December.
  11. Mealem, Yosef & Yacobi, Yacov & Yaniv, Gideon, 2010. "Trademark infringement and optimal monitoring policy," Journal of Economics and Business, Elsevier, vol. 62(2), pages 116-128, March.
  12. Éric Darmon & Thomas Le Texier, 2014. "Private or Public Law Enforcement? The Case of Digital Piracy Policies with Non-monitored Illegal Behaviors," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201403, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  13. Choi, Pilsik & Bae, Sang Hoo & Jun, Jongbyung, 2010. "Digital piracy and firms' strategic interactions: The effects of public copy protection and DRM similarity," Information Economics and Policy, Elsevier, vol. 22(4), pages 354-364, December.

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