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 horizontally 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 reduces total surplus.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 1350.
BELLEFLAMME, Paul & PICARD, Pierre, 2005.
"Piracy and competition,"
CORE Discussion Papers
2005083, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Find related papers by JEL classification: 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 L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
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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.:
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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Varian, Hal R, 1980.
"A Model of Sales,"
American Economic Review,
American Economic Association, vol. 70(4), pages 651-59, September.
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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.)
Francisco Martinez, 2008.
"Learning by Copying,"
ThE Papers
08/05, Department of Economic Theory and Economic History of the University of Granada..
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