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Piracy and competition

Author

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  • BELLEFLAMME, Paul
  • PICARD, Pierre M.

Abstract

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 equiliria in a duopoly. Comparing equilibrium prices to the prices set by a multiproduct monopolist, we show that competition drives 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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Suggested Citation

  • BELLEFLAMME, Paul & PICARD, Pierre M., 2007. "Piracy and competition," CORE Discussion Papers RP 1919, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1919
    Note: In : Journal of Economics & Management Strategy, 16(2), 351-383, 2007
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    References listed on IDEAS

    as
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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. Balestrino, Alessandro, 2008. "It is a theft but not a crime," European Journal of Political Economy, Elsevier, vol. 24(2), pages 455-469, June.
    3. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
    4. Komarova, Anastasiya & Kurdin, Alexander, 2014. "The impact of digital piracy on market strategies in software," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 54-75, December.
    5. Francisco Martinez, 2008. "Learning by Copying," ThE Papers 08/05, Department of Economic Theory and Economic History of the University of Granada..
    6. 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.
    7. Derek Eaton, 2013. "Innovation and IPRs in the Agricultural Seed Sector," CIES Research Paper series 19-2013, Centre for International Environmental Studies, The Graduate Institute.
    8. 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.
    9. Gokhan Ozertan & Baris Cevik, 2008. "Pricing Strategies and Protection of Digital Products Under Presence of Piracy: A Welfare Analysis," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 11(4), pages 1-1.
    10. Francisco Martínez-sánchez, 2012. "Collusion in Software Markets," Economics Bulletin, AccessEcon, vol. 32(2), pages 1345-1352.
    11. 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.
    12. Jiri Strelicky & Kresimir Zigic, 2011. "Intellectual Property Rights Protection and Enforcement in a Software Duopoly," CERGE-EI Working Papers wp435, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    13. Francisco Martinez-Sanchez, 2011. "Collusion, competition and piracy," Applied Economics Letters, Taylor & Francis Journals, vol. 18(11), pages 1043-1047.
    14. Carroni, Elias, 2016. "Competitive customer poaching with asymmetric firms," International Journal of Industrial Organization, Elsevier, vol. 48(C), pages 173-206.
    15. Cerqueti, Roy & Quaranta, Anna Grazia & Ventura, Marco, 2016. "Innovation, imitation and policy inaction," Technological Forecasting and Social Change, Elsevier, vol. 111(C), pages 22-30.
    16. 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.
    17. Yuanzhu Lu & Sougata Poddar, 2012. "Does Reliable Pirated Product Lead to More Piracy?," Working Papers 2012-05, Auckland University of Technology, Department of Economics.
    18. Mealem, Yosef & Yacobi, Yacov & Yaniv, Gideon, 2010. "Trademark infringement and optimal monitoring policy," Journal of Economics and Business, Elsevier, vol. 62(2), pages 116-128, March.
    19. Yuanzhu Lu & Sougata Poddar, 2015. "Does the Nature of Piracy and Competition Matter?," Working Papers 2015-04, Auckland University of Technology, Department of Economics.
    20. Minniti, Antonio & Vergari, Cecilia, 2010. "Turning Piracy into Profits: a Theoretical Investigation," Information Economics and Policy, Elsevier, vol. 22(4), pages 379-390, December.
    21. Berger, Florian & Blind, Knut & Cuntz, Alexander, 2012. "Risk factors and mechanisms of technology and insignia copying—A first empirical approach," Research Policy, Elsevier, vol. 41(2), pages 376-390.
    22. Francesco BALDUCCI, 2010. "The Web's Promotional Effect and Artists' Strategies," Working Papers 345, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    23. Kresimir Zigic & Jiri Strelicky & Michael Kunin, 2015. "Modeling Software Piracy Protection: Monopoly versus Duopoly," CERGE-EI Working Papers wp551, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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