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Competition against peer-to-peer networks

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Author Info

  • Herings, P. Jean-Jacques
  • Peeters, Ronald
  • Yang, Michael

    (METEOR)

Abstract

In this paper, we consider the competition of providers of information products against P2P networks that offer illegal versions of the information products. Depending on the generic cost factor of downloading—incorporating factors including, among other things, the degree of legal enforcement of intellectual property rights—we find that the firm may employ pricing strategies to either deter the entry of a network or to accommodate it. In the latter case, we find that the equilibrium price moves in the opposite direction of the generic cost factor of downloading. This counter-intuitive result corresponds to a very subtle form of platform competition between the firm and the network. Furthermore, profits for the firm ambiguously decrease when the generic cost factor of downloading declines, whereas total welfare unambiguously increases. This implies that it may well be welfare enhancing to relax the legal enforcements of intellectual property rights.

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Bibliographic Info

Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 020.

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Date of creation: 2008
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Handle: RePEc:dgr:umamet:2008020

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Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm

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Keywords: Strategy;

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References

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Cited by:
  1. Vendrik, Maarten & Cörvers, Frank, 2009. "Male and Female Labour Force Participation: The Role of Dynamic Adjustments to Changes in Labour Demand, Government Policies and Autonomous Trends," IZA Discussion Papers 4397, Institute for the Study of Labor (IZA).
  2. Yang Michael S., 2010. "Markets of information goods facing a strong P2P network," Research Memoranda 037, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  3. Stefan Sonea & Adrian Sonea, . "Early Warning Of Disruption. Organizational Change, Between Reaction And Proactive Attitude," Description: Managerial Challenges of the Contemporary Society 43, Faculty of Economics and Business Administration, Babes-Bolyai University.

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