Learning by Copying
We analyze the behavior of a multiproduct monopolist, a duopolist and consumers who are able to learn by copying. We show that when the effect of learning by copying is strong and the cost of copying is low enough, consumers decide to copy all goods, independently of their prices. This suggests that the DRM systems implemented by the digital industry have adverse consequences, because they hinder the use of original information goods and provide consumers with an incentive for copying. Moreover, we obtain two more kinds of equilibrium: one where each firm sells to the consumer who values its good more highly and another where each firm sells to all consumers. These results are robust when we consider that consumers’ preferences are “opposed.” Finally, by analyzing social welfare we show that, from a static perspective, the multiproduct monopoly provides a welfare at least as great as the duopoly and, from a dynamic perspective, a duopolist has at least the same incentive to create a new product as a monopolist.
|Date of creation:||13 Jun 2008|
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- Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-74, February.
- Paul, BELLEFLAMME & Pierre, PICARD, 2005.
"Piracy and competition,"
Discussion Papers (ECON - Département des Sciences Economiques)
2005057, Université catholique de Louvain, Département des Sciences Economiques.
- Paul Belleflamme & Pierre M. Picard, 2004. "Piracy and Competition," CESifo Working Paper Series 1350, CESifo Group Munich.
- BELLEFLAMME, Paul & PICARD, Pierre, 2005. "Piracy and competition," CORE Discussion Papers 2005083, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Peitz, Martin & Waelbroeck, Patrick, 2004.
"An Economist's Guide to Digital Music,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
32, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- 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.
- Martínez-Sánchez Francisco, 2007. "The Economics of IPR Protection Policies: Comment," Review of Network Economics, De Gruyter, vol. 6(4), pages 1-5, December.
- Peitz, Martin & Waelbroeck, Patrick, 2006. "Why the music industry may gain from free downloading -- The role of sampling," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 907-913, September.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
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