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Piracy and competition

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  • BELLEFLAMME, Paul
  • PICARD, Pierre M.

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

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1919.

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Handle: RePEc:cor:louvrp:-1919

Note: In : Journal of Economics & Management Strategy, 16(2), 351-383, 2007
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References

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  1. Martin Peitz & Patrick Waelbroeck, 2003. "Piracy of Digital Products: A Critical Review of the Economics Literature," CESifo Working Paper Series 1071, CESifo Group Munich.
  2. BOCCARD, Nicolas & WAUTHY, Xavier, . "Optimal quotas, price competition and products' attributes," CORE Discussion Papers RP -1685, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Landes, William M & Posner, Richard A, 1989. "An Economic Analysis of Copyright Law," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 325-63, June.
  4. Ganesh Iyer & Amit Pazgal, 2003. "Internet Shopping Agents: Virtual Co-Location and Competition," Marketing Science, INFORMS, vol. 22(1), pages 85-106, November.
  5. Oecd, 1998. "Electronic Commerce: Prices and Consumer Issues for Three Products: Books, Compact Discs and Software," OECD Digital Economy Papers 32, OECD Publishing.
  6. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  7. GABZEWICZ, Jean & SONNAC, Nathalie & WAUTHY, Xavier, . "On price competition with complementary goods," CORE Discussion Papers RP -1505, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-74, February.
  9. 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.
  10. P Belleflamme & P M Picard, 2003. "Competition over Piratable Goods," The School of Economics Discussion Paper Series 0332, Economics, The University of Manchester.
  11. Boccard, N. & Wauthy, Xavier, 1996. "The Hotelling Model with Capacity Precommitment," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997030, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Nov 1997.
  12. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
  13. Yoon, Kiho, 2002. "The optimal level of copyright protection," Information Economics and Policy, Elsevier, vol. 14(3), pages 327-348, September.
  14. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
  15. 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.
  16. Koboldt, Christian, 1995. "Intellectual Property and Optimal Copyright Protection," CSLE Discussion Paper Series 95-01, Saarland University, CSLE - Center for the Study of Law and Economics.
  17. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
  18. SHY, Oz & THISSE, Jacques-François, . "A strategic approach to software protection," CORE Discussion Papers RP -1413, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  19. repec:fth:louvco:9783 is not listed on IDEAS
  20. 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.
  21. 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.
  22. 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.
  23. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  24. Gayer, Amit & Shy, Oz, 2003. "Copyright protection and hardware taxation," Information Economics and Policy, Elsevier, vol. 15(4), pages 467-483, December.
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Citations

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Cited by:
  1. Francisco Martínez-Sánchez, 2009. "Collusion, competition and piracy," Working Papers. Serie AD 2009-20, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. 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.
  3. Minniti, Antonio & Vergari, Cecilia, 2010. "Turning Piracy into Profits: a Theoretical Investigation," Information Economics and Policy, Elsevier, vol. 22(4), pages 379-390, December.
  4. 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.
  5. 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.
  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. Alessandro Balestrino, 2007. "It is a Theft but not a Crime," CESifo Working Paper Series 2047, CESifo Group Munich.
  8. 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.
  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. 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.
  11. Francisco Martinez, 2008. "Learning by Copying," ThE Papers 08/05, Department of Economic Theory and Economic History of the University of Granada..
  12. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
  13. 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.

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