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Does Copyright Enforcement Encourage Piracy?

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  • Rick Harbaugh

    (Claremont McKenna College)

  • Rahul Khemka

    (Georgetown University)

Abstract

More intensive copyright enforcement reduces piracy, raises prices, and lowers consumer surplus. We show that these results do not hold regarding the extent rather than intensity of enforcement. When enforcement is targeted at high-value buyers such as corporate and government users, the copyright holder has an incentive to charge super-monopoly prices, thereby encouraging piracy among low-value buyers. Extending enforcement down the demand curve broadens the copyright holder’s captive market, leading to lower prices and higher sales that can increase both profits and consumer surplus. The standard tradeoff between the incentive to generate intellectual property and the cost of monopoly power is therefore avoided. Private enforcement by copyright holders may be insuciently extensive since consumers can also benefit from more extensive enforcement. Similarly, new technologies which lead to stronger control over illicit use can paradoxically benefit consumers.

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Bibliographic Info

Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2000-14.

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Handle: RePEc:clm:clmeco:2000-14

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Keywords: piracy; internet; intellectual property; copyright protection; super-monopoly pricing;

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References

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  1. Varian, Hal R, 2000. "Buying, Sharing and Renting Information Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 48(4), pages 473-88, December.
  2. Esteban, Lola & Gil, Agustin & Hernandez, Jose M, 2001. "Informative Advertising and Optimal Targeting in a Monopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 49(2), pages 161-80, June.
  3. Stanley M. Besen & Leo J. Raskind, 1991. "An Introduction to the Law and Economics of Intellectual Property," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 3-27, Winter.
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  9. Jean O. Lanjouw & Josh Lerner, 1997. "The Enforcement of Intellectual Property Rights: A Survey of the Empirical Literature," NBER Working Papers 6296, National Bureau of Economic Research, Inc.
  10. Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 155-66, June.
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Citations

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Cited by:
  1. Banerjee, Dyuti S., 2006. "Lobbying and commercial software piracy," European Journal of Political Economy, Elsevier, vol. 22(1), pages 139-155, March.
  2. Dyuti Banerjee & Ahmed Khalid & Jan-Egbert Sturm, 2005. "Socio-economic development and software piracy. An empirical assessment," Applied Economics, Taylor & Francis Journals, vol. 37(18), pages 2091-2097.
  3. Kristina M. Lybecker, 2008. "Keeping it real: anticounterfeiting strategies in the pharmaceutical industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(5), pages 389-405.
  4. Peitz, Martin & Waelbroeck, Patrick, 2006. "Piracy of digital products: A critical review of the theoretical literature," Information Economics and Policy, Elsevier, vol. 18(4), pages 449-476, November.
  5. Takeyama, Lisa N., 2009. "Copyright enforcement and product quality signaling in markets for computer software," Information Economics and Policy, Elsevier, vol. 21(4), pages 291-296, November.
  6. Matthew J. Baker & Brendan M. Cunningham, 2004. "Court Decisions and Equity Markets: Estimating the Value of Copyright Protection," Departmental Working Papers 4, United States Naval Academy Department of Economics.
  7. Dyuti S. Banerjee & Teyu Chou, 2007. "Copyright Protection And Innovation In The Presence Of Commercial Piracy," Development Research Unit Working Paper Series 05-07, Monash University, Department of Economics.
  8. D Banerjee, 2004. "Sensitivity To Tax Revenues and Optimal Anti-piracy Policy Instruments," Econometric Society 2004 Australasian Meetings 330, Econometric Society.
  9. Shariffah Zamoon & Shawn Curley, 2008. "Ripped from the Headlines: What can the Popular Press Teach us about Software Piracy?," Journal of Business Ethics, Springer, vol. 83(3), pages 515-533, December.
  10. 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.
  11. Martin Peitz & Patrick Waelbroeck, 2003. "Piracy of Digital Products: A Critical Review of the Economics Literature," CESifo Working Paper Series 1071, CESifo Group Munich.
  12. 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.
  13. Francisco Vázquez & Richard Watt, 2011. "Copyright piracy as prey–predator behavior," Journal of Bioeconomics, Springer, vol. 13(1), pages 31-43, April.
  14. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.

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