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Piracy and Quality Choice in Monopolistic Markets

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  • M. Alvisi
  • E. Argentesi
  • E. Carbonara

Abstract

We study the impact of piracy on the quality choices of a monopolist. In the absence of piracy, the monopolist has no incentive to differentiate its products. With piracy the monopolist might instead produce more than one quality, so that differentiation arises as the optimal strategy. This is because the producer wants to divert consumers from the pirated good to the original one. Differentiation involves either producing a new, low-quality good such that piracy is either eliminated or still observed in equilibrium.

Suggested Citation

  • M. Alvisi & E. Argentesi & E. Carbonara, 2002. "Piracy and Quality Choice in Monopolistic Markets," Working Papers 436, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:436
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    References listed on IDEAS

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    1. Jaskold Gabszewicz, Jean & Shaked, Avner & Sutton, John & Thisse, Jacques-Francois, 1986. "Segmenting the market: The monopolist's optimal product mix," Journal of Economic Theory, Elsevier, vol. 39(2), pages 273-289, August.
    2. 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.
    3. Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-174, February.
    4. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
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    Cited by:

    1. Arun Sundararajan, 2003. "Managing Digital Piracy: Pricing, Protection and Welfare," Law and Economics 0307001, University Library of Munich, Germany.
    2. Cho, Won-Young & Ahn, Byong-Hun, 2010. "Versioning of information goods under the threat of piracy," Information Economics and Policy, Elsevier, vol. 22(4), pages 332-340, December.
    3. Paulomi Basu & Tanmoyee Banerjee, 2018. "A Theoretical Analysis Of Product Versioning In The Context Of Commercial Piracy," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 63(219), pages 115-136, October –.
    4. 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.
    5. Terrence August & Tunay I. Tunca, 2008. "Let the Pirates Patch? An Economic Analysis of Software Security Patch Restrictions," Information Systems Research, INFORMS, vol. 19(1), pages 48-70, March.
    6. Paulomi Basu & Tanmoyee Banerjee & Santanu Mitra, 2022. "An Experimental Understanding of Transaction Utility in Piracy," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 47(4), pages 123-141.
    7. Martin Peitz & Patrick Waelbroeck, 2003. "Piracy of Digital Products: A Critical Review of the Economics Literature," CESifo Working Paper Series 1071, CESifo.

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