Accommodation or Deterrence in the Face of Commercial Piracy: the Impact of Intellectual Property Rights (IPR) Protection
AbstractIn this paper, we address the issue of illegal copying or counterfeiting of the original product and Intellectual Property Rights (IPR) protections. The original product developer makes costly investment to deter piracy in a given regime of IPR protection. In the presence of a commercial pirate, we find that it is profitable for the original producer to accommodate the pirate when there is weak IPR protection, and deter when the IPR protection is strong. However, in the comparative statics analysis, we find that there is a non-monotonic relationship between the optimal level of deterrence (chosen by the original producer) and the degree of IPR protection in the economy. The relationship between the rate of piracy and IPR protection is found to be monotonically decreasing whereas the relationship between the rate of piracy and the quality of the pirated product turns out to be non-monotonic. On the other side, from the commercial pirate¡¯s point of view, the most profitable way to survive in the market is to produce a pirated product of moderate quality. Our model also provided a possible explanation of varying piracy rates across countries/regions.
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Bibliographic InfoPaper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 389.
Length: 29 pages
Date of creation: Nov 2009
Date of revision:
Piracy; Copyright violations; Raising rival¡¯s cost; Deterrence; Accommodation; Product quality;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
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