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Anti-piracy policy and quality differential in markets for information goods

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Author Info

  • Francisco Martínez-Sánchez

    ()
    (Universidad de Alicante)

  • Javier M. López Cuñat

    (Universidad de Alicante)

Abstract

In 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 Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2011-02.

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Length: 26 pages
Date of creation: Jan 2011
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2011-02

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Related research

Keywords: for-profit piracy; quality; monitoring; price competition.;

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  1. Sonia Oreffice & Climent Quintana, 2009. "Anthropometry and Socioeconomics in the Couple: Evidence from the PSID," Working Papers 2009-22, FEDEA.
  2. Banerjee, Dyuti S., 2006. "Lobbying and commercial software piracy," European Journal of Political Economy, Elsevier, vol. 22(1), pages 139-155, March.
  3. Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-53, September.
  4. Crampes, C. & Hollander, A., 1991. "Duopoly and Quality Standards," Cahiers de recherche 9128, Universite de Montreal, Departement de sciences economiques.
  5. 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.
  6. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
  7. van der Leij Marco & Goyal Sanjeev, 2011. "Strong Ties in a Small World," Review of Network Economics, De Gruyter, vol. 10(2), pages 1-22, June.
  8. 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.
  9. Sougata Poddar, 2005. "Why Software Piracy Rates Differ – A Theoretical Analysis," Departmental Working Papers wp0515, National University of Singapore, Department of Economics.
  10. Sougata Poddar, 2005. "Network Externality and Commercial Software Piracy," Departmental Working Papers wp0516, National University of Singapore, Department of Economics.
  11. MartI´nez-Sánchez, Francisco, 2010. "Avoiding commercial piracy," Information Economics and Policy, Elsevier, vol. 22(4), pages 398-408, December.
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