Piracy Accommodation and the Optimal Timing of Royalty Payments
AbstractThis paper generalizes the two-period model of Watt (2000) who demonstrates the possibility of optimal accommodation of a pirate when the royalty rate applying to a creation is uniform and second-period Cournot competition applies. Admitting nonlinear contracts with period-specific royalty rates that leave total payments unchanged, simulation analysis shows that a producer of originals does better to increase the royalty rate in period 1 and decrease the rate to a negative level in period 2, thereby more than offsetting the usual cost advantage available to a pirate. Watt's illustrative examples regarding piracy accommodation (but not piracy exclusion) are overturned when a nonlinear contract is chosen optimally, although accommodation remains optimal in some other cases. Further, where exclusion is impossible under uniform royalties, cases exist where exclusion is feasible under nonlinear royalties. Even so, accommodation may be a preferable strategy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 06/01.
Length: 31 pages
Date of creation: 01 Feb 2006
Date of revision:
Contact details of provider:
Postal: Private Bag 4800, Christchurch, New Zealand
Phone: 64 3 369 3123 (Administrator)
Fax: 64 3 364 2635
Web page: http://www.econ.canterbury.ac.nz
More information through EDIRC
accommodating copyright piracy; nonlinear royalty contracts;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
- NEP-COM-2006-09-30 (Industrial Competition)
- NEP-CUL-2006-09-30 (Cultural Economics)
- NEP-LAW-2006-09-30 (Law & Economics)
- NEP-MKT-2006-09-30 (Marketing)
- NEP-REG-2006-09-30 (Regulation)
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.:
- Fernando Nascimento & Wilfried R. Vanhonacker, 1988. "Optimal Strategic Pricing of Reproducible Consumer Products," Management Science, INFORMS, vol. 34(8), pages 921-937, August.
- Michele Boldrin & David Levine, 2002.
"The Case Against Intellectual Property,"
American Economic Review,
American Economic Association, vol. 92(2), pages 209-212, May.
- Michele Boldrin & David K Levine, 2008.
"Against Intellectual Monopoly,"
122247000000002371, UCLA Department of Economics.
- Stan Liebowitz, 2005. "Economists’ Topsy-Turvy View of Piracy," Law and Economics 0505002, EconWPA.
- Benjamin Klein & Andres V. Lerner & Kevin M. Murphy, 2002. "The Economics of Copyright "Fair Use" in a Networked World," American Economic Review, American Economic Association, vol. 92(2), pages 205-208, May.
- Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-74, February.
- Dixit, Avinash, 1979.
"The Role of Investment in Entry-Deterrence,"
The Warwick Economics Research Paper Series (TWERPS)
140, University of Warwick, Department of Economics.
- Takeyama, Lisa N, 1997. "The Intertemporal Consequences of Unauthorized Reproduction of Intellectual Property," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 511-22, October.
- Besen, Stanley M & Kirby, Sheila Nataraj, 1989. "Private Copying, Appropriability, and Optimal Copying Royalties," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 255-80, October.
- Bakos, Yannis & Brynjolfsson, Erik & Lichtman, Douglas, 1999. "Shared Information Goods," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 117-55, April.
- Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-46, April.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Albert Yee).
If references are entirely missing, you can add them using this form.