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Learning by Copying

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  • Francisco Martinez

    ()
    (Department of Economic Theory and Economic History, University of Granada.)

Abstract

We analyze the behavior of a multiproduct monopolist, a duopolist and consumers who are able to learn by copying. We show that when the effect of learning by copying is strong and the cost of copying is low enough, consumers decide to copy all goods, independently of their prices. This suggests that the DRM systems implemented by the digital industry have adverse consequences, because they hinder the use of original information goods and provide consumers with an incentive for copying. Moreover, we obtain two more kinds of equilibrium: one where each firm sells to the consumer who values its good more highly and another where each firm sells to all consumers. These results are robust when we consider that consumers’ preferences are “opposed.” Finally, by analyzing social welfare we show that, from a static perspective, the multiproduct monopoly provides a welfare at least as great as the duopoly and, from a dynamic perspective, a duopolist has at least the same incentive to create a new product as a monopolist.

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File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers08_05.pdf
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Bibliographic Info

Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number 08/05.

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Length: 22 pages
Date of creation: 13 Jun 2008
Date of revision:
Handle: RePEc:gra:wpaper:08/05

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Related research

Keywords: Consumers; Learning by Copying; Opposed Preferences; DRM; Copy; Piracy.;

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References

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  1. Paul, BELLEFLAMME & Pierre, PICARD, 2005. "Piracy and competition," Discussion Papers (ECON - Département des Sciences Economiques) 2005057, Université catholique de Louvain, Département des Sciences Economiques.
  2. Peitz, Martin & Waelbroeck, Patrick, 2006. "Why the music industry may gain from free downloading -- The role of sampling," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 907-913, September.
  3. 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.
  4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  5. Peitz, Martin & Waelbroeck, Patrick, 2004. "An Economist's Guide to Digital Music," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 32, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  6. Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-74, February.
  7. Martínez-Sánchez Francisco, 2007. "The Economics of IPR Protection Policies: Comment," Review of Network Economics, De Gruyter, vol. 6(4), pages 1-5, December.
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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).

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