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Copyright protection and entry deterrence

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  • Inceoglu, Firat

Abstract

Illegal copying of digital products has become an increasingly debated issue. I present a previously unmentioned possible effect of piracy, namely that it may benefit an incumbent producer by making entry less profitable. In a differentiated products setting I show that when entry costs or the consumer valuation of the product are high enough or when consumer heterogeneity is sufficiently low, an incumbent monopolist will prefer less than full protection and thus allow the piracy of its own product. When the consumer valuations for the good are high, then there is no market expansion effect of illegal copying and consumers might end up worse-off because of piracy.

Suggested Citation

  • Inceoglu, Firat, 2015. "Copyright protection and entry deterrence," Information Economics and Policy, Elsevier, vol. 32(C), pages 38-45.
    • Handle: RePEc:eee:iepoli:v:32:y:2015:i:c:p:38-45
    DOI: 10.1016/j.infoecopol.2015.07.001
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    References listed on IDEAS

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    Cited by:

    1. T. Randolph Beard & George S. Ford & Gilad Sorek & Lawrence J. Spiwak, 2018. "Piracy, Imitation, and Optimal Copyright Policy," Southern Economic Journal, John Wiley & Sons, vol. 84(3), pages 815-830, January.

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    More about this item

    Keywords

    Piracy; IP protection; Entry deterrence;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K39 - Law and Economics - - Other Substantive Areas of Law - - - Other

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