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Product Quality in the presence of Network Externality and Commercial Piracy

Author

Listed:
  • Tanmoyee Banerjee (Chatterjee)

    (Jadavpur University)

  • Nilanjana Biswas( Mitra)

    (Sushil Kar College)

Abstract

Our paper develops a two-stage sequential game between an incumbent and a pirate to find the optimal quality level of the firm in the presence of network externality. The results show that the incumbent in the presence of piracy chooses minimum quality for its product and undertakes an anti-copying investment that adversely affects the effective quality level of the pirated good. Further, under SPNE the incumbent becomes a price leader and the pirate chooses to be a follower.

Suggested Citation

  • Tanmoyee Banerjee (Chatterjee) & Nilanjana Biswas( Mitra), 2013. "Product Quality in the presence of Network Externality and Commercial Piracy," Economics Bulletin, AccessEcon, vol. 33(4), pages 3006-3013.
    • Handle: RePEc:ebl:ecbull:eb-13-00630
    as

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    References listed on IDEAS

    as
    1. Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 155-166, June.
    2. Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-353, September.
    3. Arun Sundararajan, 2003. "Managing Digital Piracy: Pricing, Protection and Welfare," Law and Economics 0307001, University Library of Munich, Germany.
    4. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    piracy; network externality effect; anti copying investment;
    All these keywords.

    JEL classification:

    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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