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Piracy and competition

  • BELLEFLAMME, Paul
  • PICARD, Pierre M.

The effects of (private, small-scale) piracy on the pricing behavior of producers of information goods are studied within a unified model of vertical differentiation. Although information goods are assumed to be perfectly differentiated, demands are interdependent because the copying technology exhibits increasing returns to scale. We characterize the Bertrand-Nash equilibria in a duopoly. Comparing equilibrium prices to the prices set by a multiproduct monopolist, we show that competitiondrives prices up and may lead to price dispersion. Competition reduces total surplus in the short run but provides higher incentives to create in the long run.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1919.

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Handle: RePEc:cor:louvrp:-1919
Note: In : Journal of Economics & Management Strategy, 16(2), 351-383, 2007
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  1. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
  2. Martin Peitz & Patrick Waelbroeck, 2003. "Piracy of Digital Products: A Critical Review of the Economics Literature," CESifo Working Paper Series 1071, CESifo Group Munich.
  3. SHY, Oz & THISSE, Jacques-François, . "A strategic approach to software protection," CORE Discussion Papers RP -1413, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  5. Jean Gabszewicz & Nathalie Sonnac & Xavier Wauthy, 2000. "On Price Competition with Complementary Goods," Working Papers 2000-24, Centre de Recherche en Economie et Statistique.
  6. Liebowitz, S J, 1985. "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 945-57, October.
  7. Ganesh Iyer & Amit Pazgal, 2003. "Internet Shopping Agents: Virtual Co-Location and Competition," Marketing Science, INFORMS, vol. 22(1), pages 85-106, November.
  8. Besen, Stanley M & Kirby, Sheila Nataraj, 1989. "Private Copying, Appropriability, and Optimal Copying Royalties," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 255-80, October.
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  12. Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-74, February.
  13. 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 236-46, April.
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  16. Nicolas Boccard & Xavier Wauthy, 2003. "Optimal Quotas, Price Competition And Products' Attributes," The Japanese Economic Review, Japanese Economic Association, vol. 54(4), pages 395-408.
  17. Yoon, Kiho, 2002. "The optimal level of copyright protection," Information Economics and Policy, Elsevier, vol. 14(3), pages 327-348, September.
  18. Oecd, 1998. "Electronic Commerce: Prices and Consumer Issues for Three Products: Books, Compact Discs and Software," OECD Digital Economy Papers 32, OECD Publishing.
  19. Boccard, N. & Wauthy, Xavier, 1996. "The Hotelling Model with Capacity Precommitment," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997030, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Nov 1997.
  20. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  21. Koboldt, Christian, 1995. "Intellectual Property and Optimal Copyright Protection," CSLE Discussion Paper Series 95-01, Saarland University, CSLE - Center for the Study of Law and Economics.
  22. BELLEFLAMME, Paul & PICARD, Pierre M., 2004. "Competition over piratable goods," CORE Discussion Papers 2004055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  23. Landes, William M & Posner, Richard A, 1989. "An Economic Analysis of Copyright Law," The Journal of Legal Studies, University of Chicago Press, vol. 18(2), pages 325-63, June.
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