Anti-piracy policy and quality differential in markets for information goods
AbstractIn this paper we analyze the strategic decisions of the government, the incumbent and the pirate in a market where the good is piratable. We show that deterred or accommodated piracy can occur in equilibrium, but pure monopoly cannot occur for any anti-piracy policy. We also show that the initial quality differential between the original and the pirated product is essential to explain the effects of an increase in the quality of pirated product on both the level of piracy and the optimal monitoring rate. Assuming a one-stage entry process and a sufficiently high quality differential, we prove that the incumbent always prefers to move first and make a credible commitment to a price. However, this is not true with a two-stage entry process.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2011-02.
Length: 26 pages
Date of creation: Jan 2011
Date of revision:
Publication status: Published by Ivie
for-profit piracy; quality; monitoring; price competition.;
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-2011-02-05 (All new papers)
- NEP-COM-2011-02-05 (Industrial Competition)
- NEP-CUL-2011-02-05 (Cultural Economics)
- NEP-IND-2011-02-05 (Industrial Organization)
- NEP-LAW-2011-02-05 (Law & Economics)
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