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Collusion, competition and piracy

Author

Listed:
  • Francisco Martínez-Sánchez

    () (Universidad de Alicante)

Abstract

In this paper we analyze firms' ability to tacitly collude on pricesin an infinitely repeated duopoly game of vertical productdifferentiation. We show that firms collude if and only if their discountfactor is high enough, i.e. if they value future profits sufficiently. We alsoshow that a lower cost of copying facilitates collusion but that a higherquality of the copy hinders collusion. Thus, the overall effect of thesenew characteristics of copies made by consumers is ambiguous.

Suggested Citation

  • Francisco Martínez-Sánchez, 2009. "Collusion, competition and piracy," Working Papers. Serie AD 2009-20, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:2009-20
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2009-20.pdf
    File Function: Fisrt version / Primera version, 2009
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    References listed on IDEAS

    as
    1. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
    2. Paul Belleflamme & Pierre M. Picard, 2007. "Piracy and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 351-383, June.
    3. Schultz, Christian, 2005. "Transparency on the consumer side and tacit collusion," European Economic Review, Elsevier, vol. 49(2), pages 279-297, February.
    4. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
    5. Francisco Martínez-Sánchez, 2007. "Why Does The Pirate Decide To Be The Leader In Prices?," Working Papers. Serie AD 2007-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    6. Hackner, Jonas, 1996. "Optimal symmetric punishments in a Bertrand differentiated products duopoly," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 611-630, July.
    7. Francisco Martinez, 2008. "Learning by Copying," ThE Papers 08/05, Department of Economic Theory and Economic History of the University of Granada..
    8. Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
    9. 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.
    10. repec:ebl:ecbull:v:6:y:2003:i:10:p:1-9 is not listed on IDEAS
    11. Liu, Qihong & Serfes, Konstantinos, 2007. "Market segmentation and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 355-378, April.
    12. Hackner, Jonas, 1994. "Collusive pricing in markets for vertically differentiated products," International Journal of Industrial Organization, Elsevier, vol. 12(2), pages 155-177, June.
    13. Iturbe-Ormaetxe, Iñigo & Ponti, Giovanni & Tomás, Josefa & Ubeda, Luis, 2011. "Framing effects in public goods: Prospect Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 72(2), pages 439-447, June.
    14. Nikolaos Georgantzis & Carlos Gutiérrez-Hita, 2008. "Service provision on a network with endogenous consumption capacity," Working Papers. Serie AD 2008-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Romeu, Andrés & Martinez-Sanchez, Francisco, 2015. "Technological Development and Software Piracy," UMUFAE Economics Working Papers 43702, DIGITUM. Universidad de Murcia.
    2. Nikolay Zenkevich & Margarita Gladkova, 2016. "Price Competition on the Market of Counterfeiting Software," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 1-10, June.

    More about this item

    Keywords

    Collusion; competition; piracy; consumers; cost of copying;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • 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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