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Accommodation or deterrence in the face of commercial piracy: the impact of intellectual property rights protection

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  • Yuanzhu Lu
  • Sougata Poddar

Abstract

In this paper, we study when the original product developer makes costly investment to deter a commercial pirate in a given regime of intellectual property rights (IPR) protection. We find that when the consumers' tastes are sufficiently diverse and the IPR protection is weak, it is profitable for the original producer to accommodate the pirate. In all other cases, it is profitable to deter. In the comparative statics analysis, we find a non-monotonic relationship between the optimal level of deterrence and the degree of IPR protection in the economy. We also find interesting relationships between the rate of piracy and other parameters like the strength of IPR protection, consumers' tastes, and quality of the pirated product. We find that from the commercial pirate's point of view, the most profitable way to survive in the market is to produce a pirated product of moderate quality. Copyright 2012 Oxford University Press 2011 All rights reserved, Oxford University Press.

Suggested Citation

  • Yuanzhu Lu & Sougata Poddar, 2012. "Accommodation or deterrence in the face of commercial piracy: the impact of intellectual property rights protection," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 518-538, July.
    • Handle: RePEc:oup:oxecpp:v:64:y:2012:i:3:p:518-538
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    File URL: http://hdl.handle.net/10.1093/oep/gpr052
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    Citations

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    Cited by:

    1. Luis Aguiar & Jörg Claussen & Christian Peukert, 2018. "Catch Me If You Can: Effectiveness and Consequences of Online Copyright Enforcement," Information Systems Research, INFORMS, vol. 29(3), pages 656-678, September.
    2. Žigić, Krešimir & Střelický, Jiří & Kúnin, Michael, 2023. "Copyright and firms’ own IPR protection in a software market: Monopoly versus duopoly," Economic Modelling, Elsevier, vol. 123(C).
    3. Yuanzhu Lu & Sougata Poddar, 2019. "Limiting End-user Piracy - The Role of Private and Public Anti-Piracy Measure," Annals of Economics and Finance, Society for AEF, vol. 20(1), pages 181-197, May.
    4. Maria Caterina Bramati & Arsen Palestini & Mauro Rota, 2016. "Effects of Law-Enforcement Efficiency and Duration of Trials in an Oligopolistic Competition Among Fair and Unfair Firms," Journal of Optimization Theory and Applications, Springer, vol. 170(2), pages 650-669, August.
    5. Barrachina, Alex & Forner-Carreras, Teresa, 2022. "Market must be defended: The role of counter-espionage policy in protecting domestic market welfare," Information Economics and Policy, Elsevier, vol. 58(C).
    6. Banerjee, Tanmoyee & Biswas, Nilanjana, 2016. "IPR protection and optimal entry modes of multinationals," Economics Discussion Papers 2016-5, Kiel Institute for the World Economy (IfW Kiel).
    7. Christian Peukert & Margaritha Windisch, 2023. "The Economics of Copyright in the Digital Age," CESifo Working Paper Series 10687, CESifo.
    8. Yuanzhu Lu & Sougata Poddar, 2012. "Does Reliable Pirated Product Lead to More Piracy?," Working Papers 2012-05, Auckland University of Technology, Department of Economics.
    9. Yuanzhu Lu & Sougata Poddar, 2015. "Does the Nature of Piracy and Competition Matter?," Working Papers 2015-04, Auckland University of Technology, Department of Economics.
    10. Kresimir Zigic & Jiri Strelicky & Michal Kunin, 2020. "Private and Public IPR Protection in a Vertically Differentiated Software Duopoly," CERGE-EI Working Papers wp671, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    11. Gomes, Nicolas Dias & Cerqueira, Pedro André & Almeida, Luís Alçada, 2015. "A survey on software piracy empirical literature: Stylized facts and theory," Information Economics and Policy, Elsevier, vol. 32(C), pages 29-37.

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