Why Does The Pirate Decide To Be The Leader In Prices?
AbstractWe analyze the roles of the government and the incumbent in preventing piracy, and the reasons and incentives why a pirate would want to be a leader in prices. The framework of analysis used is a duopoly model of vertical product differentiation with price competition, where both incumbent and pirate are committed to keep their prices. We find that both government and incumbent have a key role in avoiding the entry of the pirate. We show that the government will not help the incumbent to become a monopolist, even if he installs an antipiracy system, because a monopoly provides the lowest social welfare. However, he will let the pirate enters as a follower or as a leader, or encourage the incumbent to deter the entry of the pirate, which depends on the technology of the government for monitoring piracy. The pirate decides to become a leader to avoid being brought down by the incumbent and the government, although the leader's profit is lower than the follower's profit. Finally, we find that high-income countries with cheaper monitoring technology have lower piracy rates.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2007-01.
Length: 26 pages
Date of creation: Mar 2007
Date of revision:
Publication status: Published by Ivie
Pirate; Incumbent; Government; Price Leadership; Copy; Monitoring Piracy; Income;
Find related papers by JEL classification:
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-10 (All new papers)
- NEP-COM-2007-03-10 (Industrial Competition)
- NEP-CUL-2007-03-10 (Cultural Economics)
- NEP-LAW-2007-03-10 (Law & Economics)
- NEP-MIC-2007-03-10 (Microeconomics)
- NEP-REG-2007-03-10 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wauthy, X., 1994.
"Quality Choice in Models of Vertical Differentiation,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1994033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-53, September.
- Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
- 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.
- Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-31, June.
- Michele Boldrin & David Levine, 2006.
"Globalization, intellectual property, and economic prosperity,"
Spanish Economic Review,
Springer, vol. 8(1), pages 23-34, 03.
- Michele Boldrin & David K Levine, 2006. "Globalization, Intellectual Property, and Economic Prosperity," Levine's Working Paper Archive 122247000000001328, David K. Levine.
- Crampes, C. & Hollander, A., 1991.
"Duopoly and Quality Standards,"
Cahiers de recherche
9128, Universite de Montreal, Departement de sciences economiques.
- Martin Peitz & Patrick Waelbroeck, 2004.
"An Economist’s Guide to Digital Music,"
CESifo Working Paper Series
1333, CESifo Group Munich.
- 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.
- Antonio Rodriguez Andres, 2004. "The Relationship Between Software Protection And Piracy: Evidence From Europe," Law and Economics 0402001, EconWPA.
- 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).
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
- Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
- repec:ebl:ecbull:v:6:y:2003:i:10:p:1-9 is not listed on IDEAS
- Hamilton, J.H. & Slutsky, S.M., 1988.
"Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria,"
88-4, Florida - College of Business Administration.
- Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
- Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-74, February.
- Champsaur, Paul & Rochet, Jean-Charles, 1989. "Multiproduct Duopolists," Econometrica, Econometric Society, vol. 57(3), pages 533-57, May.
- Bezmen, Trisha L. & Depken II, Craig A., 2006. "Influences on software piracy: Evidence from the various United States," Economics Letters, Elsevier, vol. 90(3), pages 356-361, March.
- Moraga-Gonzalez, Jose Luis & Viaene, Jean-Marie, 2005. "Trade policy and quality leadership in transition economies," European Economic Review, Elsevier, vol. 49(2), pages 359-385, February.
- Francisco Martínez-Sánchez, 2009.
"Collusion, competition and piracy,"
Working Papers. Serie AD
2009-20, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición).
If references are entirely missing, you can add them using this form.