IDEAS home Printed from https://ideas.repec.org/p/ivi/wpasad/2011-02.html
   My bibliography  Save this paper

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
    as

    Download full text from publisher

    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2011-02.pdf
    File Function: Fisrt version / Primera version, 2011
    Download Restriction: no

    Other versions of this item:

    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. Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-353, September.
    3. Crampes, Claude & Hollander, Abraham, 1995. "Duopoly and quality standards," European Economic Review, Elsevier, vol. 39(1), pages 71-82, January.
    4. Arai, Yasuhiro, 2011. "Civil and criminal penalties for copyright infringement," Information Economics and Policy, Elsevier, vol. 23(3), pages 270-280.
    5. Theo Papadopoulos, 2003. "Determinants of International Sound Recording Piracy," Economics Bulletin, AccessEcon, vol. 6(10), pages 1-9.
    6. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
    7. Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
    8. Luis J. Hall, 2010. "Differentiated social interactions in the US schooling race gap," Working Papers. Serie AD 2010-17, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    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. van der Leij Marco & Goyal Sanjeev, 2011. "Strong Ties in a Small World," Review of Network Economics, De Gruyter, vol. 10(2), pages 1-22, June.
    11. Ming Chang & Chiu Lin & Dachrahn Wu, 2008. "Piracy and limited liability," Journal of Economics, Springer, vol. 95(1), pages 25-53, October.
    12. MartI´nez-Sánchez, Francisco, 2010. "Avoiding commercial piracy," Information Economics and Policy, Elsevier, vol. 22(4), pages 398-408, December.
    13. Paul Belleflamme, 2005. "Versioning in the Information Economy: Theory and Applications," CESifo Economic Studies, CESifo, vol. 51(2-3), pages 329-358.
    14. Kiema, Ilkka, 2008. "Commercial piracy and intellectual property policy," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 304-318, October.
    15. Marron, Donald B & Steel, David G, 2000. "Which Countries Protect Intellectual Property? The Case of Software Piracy," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 159-174, April.
    16. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
    17. Sougata Poddar, 2005. "Why Software Piracy Rates Differ – A Theoretical Analysis," Departmental Working Papers wp0515, National University of Singapore, Department of Economics.
    18. Sylvain Dejean, 2009. "What Can We Learn from Empirical Studies About Piracy?," CESifo Economic Studies, CESifo, pages 326-352.
    19. Sonia Oreffice & Climent Quintana, 2009. "Anthropometry and Socioeconomics in the Couple: Evidence from the PSID," Working Papers 2009-22, FEDEA.
    20. Sougata Poddar, 2005. "Network Externality and Commercial Software Piracy," Departmental Working Papers wp0516, National University of Singapore, Department of Economics.
    21. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
    22. Banerjee, Dyuti S., 2006. "Lobbying and commercial software piracy," European Journal of Political Economy, Elsevier, vol. 22(1), pages 139-155, March.
    23. repec:ebl:ecbull:v:6:y:2003:i:10:p:1-9 is not listed on IDEAS
    24. Jen-Te Yao, 2005. "Counterfeiting and an Optimal Monitoring Policy," European Journal of Law and Economics, Springer, vol. 19(1), pages 95-114, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    for-profit piracy; quality; monitoring; price competition.;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2011-02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición). General contact details of provider: http://edirc.repec.org/data/ievages.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.