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Anti-piracy policy and quality differential in markets for information goods

Author

Listed:
  • Francisco Martínez-Sánchez

    (Universidad de Alicante)

  • Javier M. López Cuñat

    (Universidad de Alicante)

Abstract

In this paper we analyze the strategic decisions of the government, the incumbent and the pirate in a market where the good is piratable. We show that deterred or accommodated piracy can occur in equilibrium, but pure monopoly cannot occur for any anti-piracy policy. We also show that the initial quality differential between the original and the pirated product is essential to explain the effects of an increase in the quality of pirated product on both the level of piracy and the optimal monitoring rate. Assuming a one-stage entry process and a sufficiently high quality differential, we prove that the incumbent always prefers to move first and make a credible commitment to a price. However, this is not true with a two-stage entry process.

Suggested Citation

  • Francisco Martínez-Sánchez & Javier M. López Cuñat, 2011. "Anti-piracy policy and quality differential in markets for information goods," Working Papers. Serie AD 2011-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2011-02
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    References listed on IDEAS

    as
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    Cited by:

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    More about this item

    Keywords

    for-profit piracy; quality; monitoring; price competition.;
    All these keywords.

    JEL classification:

    • 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
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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