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Digital piracy and firms' strategic interactions: The effects of public copy protection and DRM similarity

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  • Choi, Pilsik
  • Bae, Sang Hoo
  • Jun, Jongbyung

Abstract

The purpose of this paper is to investigate how different types of strategic interaction affect firms' optimal levels of digital rights management (DRM). In our game-theoretical duopoly model, the firms do not directly compete with prices, but they become interdependent while coping with digital piracy. Our analysis shows that (1) stricter public copy protection by the government leads to lower DRM levels and more piracy when the firms regard their DRM levels as "strategic substitutes," but to higher DRM levels and less piracy when the firms perceive their DRM levels as "strategic complements," and (2) a higher degree of similarity between the DRM systems leads to lower DRM levels and more piracy. We also discuss the policy implications of these findings.

Suggested Citation

  • Choi, Pilsik & Bae, Sang Hoo & Jun, Jongbyung, 2010. "Digital piracy and firms' strategic interactions: The effects of public copy protection and DRM similarity," Information Economics and Policy, Elsevier, vol. 22(4), pages 354-364, December.
  • Handle: RePEc:eee:iepoli:v:22:y:2010:i:4:p:354-364
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    References listed on IDEAS

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    1. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
    2. Yoon, Kiho, 2002. "The optimal level of copyright protection," Information Economics and Policy, Elsevier, vol. 14(3), pages 327-348, September.
    3. Cremer, Helmuth & Pestieau, Pierre, 2009. "Piracy prevention and the pricing of information goods," Information Economics and Policy, Elsevier, vol. 21(1), pages 34-42, February.
    4. Paul Belleflamme & Pierre M. Picard, 2007. "Piracy and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 351-383, June.
    5. Liebowitz, S J, 1985. "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 945-957, October.
    6. Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-174, February.
    7. Stanley M. Besen & Leo J. Raskind, 1991. "An Introduction to the Law and Economics of Intellectual Property," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 3-27, Winter.
    8. Yooki Park & Suzanne Scotchmer, 2004. "Digital Rights Management and the Pricing of Digital Products," Working Papers 04-09, NET Institute, revised Oct 2004.
    9. Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-246, April.
    10. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    11. 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.
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    Citations

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    Cited by:

    1. Eaton, Derek, 2015. "Innovation and IPRs for Agricultural Crop Varieties as Intermediate Goods," 2015 Conference, August 9-14, 2015, Milan, Italy 211581, International Association of Agricultural Economists.
    2. Éric Darmon & Thomas Le Texier, 2014. "Private or Public Law Enforcement? The Case of Digital Piracy Policies with Non-monitored Illegal Behaviors," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201403, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    3. Tsai, Ming-Fang & Chiou, Jiunn-Rong & Lin, Chun-Hung A., 2012. "A model of counterfeiting: A duopoly approach," Japan and the World Economy, Elsevier, vol. 24(4), pages 283-291.
    4. Eaton, Derek, 2014. "A model of IPRs in the international supply chain of seeds and agricultural production," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182643, European Association of Agricultural Economists.

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