IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/3289.html
   My bibliography  Save this paper

Piracy of Digital Products: A Contest Theoretical Approach

Author

Listed:
  • Hoffmann, Magnus
  • Schmidt, Frederik

Abstract

In the following, we examine a market of a digital consumption good with monopolistic supply. In this market, it is the ability of the consumer to bypass (”crack”) the copy-protection of the monopolist which induces a lower price of the digital good, compared to an uncontested monopoly (textbook case). We analyze the complex relationship between the cracking efforts of the consumer, the copy-protection efforts and the pricing decision of the monopolist, and the welfare of the economy. We find, for example, that the monopolist will deter piracy if the (exogenous) relative effectiveness of the consumer’s bypassing activity is low compared to the copy-protection technology. In this case welfare is lower than the welfare in the textbook case. On the contrary, welfare rises above the textbook case level if the relative effectiveness of cracking is sufficiently high.

Suggested Citation

  • Hoffmann, Magnus & Schmidt, Frederik, 2007. "Piracy of Digital Products: A Contest Theoretical Approach," MPRA Paper 3289, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3289
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/3289/1/MPRA_paper_3289.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/5944/3/MPRA_paper_5944.pdf
    File Function: revised version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/6180/3/MPRA_paper_6180.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Herschel I. Grossman, 2001. "The Creation of Effective Property Rights," American Economic Review, American Economic Association, vol. 91(2), pages 347-352, May.
    2. Epstein, Gil S. & Nitzan, Shmuel, 2004. "Strategic restraint in contests," European Economic Review, Elsevier, vol. 48(1), pages 201-210, February.
    3. Richard Allard, 1988. "Rent-seeking with non-identical players," Public Choice, Springer, vol. 57(1), pages 3-14, April.
    4. Franco Modigliani, 1958. "New Developments on the Oligopoly Front," Journal of Political Economy, University of Chicago Press, vol. 66(3), pages 215-215.
    5. Paul Belleflamme, 2003. "Pricing information goods in the presence of copying," Chapters, in: Wendy J. Gordon & Richard Watt (ed.), The Economics of Copyright, chapter 2, pages 26-54, Edward Elgar Publishing.
    6. Gil S. Epstein & Shmuel Nitzan, 2003. "Political culture and monopoly price determination," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 21(1), pages 1-19, August.
    7. Mark Gradstein, 1995. "Intensity Of Competition, Entry And Entry Deterrence In Rent Seeking Contests," Economics and Politics, Wiley Blackwell, vol. 7(1), pages 79-91, March.
    8. Epstein, Gil S. & Nitzan, Shmuel, 2003. "The social cost of rent seeking when consumer opposition influences monopoly behavior," European Journal of Political Economy, Elsevier, vol. 19(1), pages 61-69, March.
    9. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-1288, December.
    10. Paul Belleflamme, 2002. "Pricing Information Goods in the Presence of Copying," Working Papers 463, Queen Mary University of London, School of Economics and Finance.
    11. Dixit, Avinash, 1982. "Recent Developments in Oligopoly Theory," American Economic Review, American Economic Association, vol. 72(2), pages 12-17, May.
    12. Leidy, Michael P, 1994. "Rent Dissipation through Self-Regulation: The Social Cost of Monopoly under Threat of Reform," Public Choice, Springer, vol. 80(1-2), pages 105-128, July.
    13. Martin Peitz & Patrick Waelbroeck, 2003. "Piracy of Digital Products: A Critical Review of the Economics Literature," CESifo Working Paper Series 1071, CESifo.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hoffmann, Magnus & Rota-Graziosi, Grégoire, 2012. "Endogenous timing in general rent-seeking and conflict models," Games and Economic Behavior, Elsevier, vol. 75(1), pages 168-184.
    2. Hoffmann, Magnus & Rota-Graziosi, Grégoire, 2012. "Endogenous timing in general rent-seeking and conflict models," Games and Economic Behavior, Elsevier, vol. 75(1), pages 168-184.
    3. Konrad, Kai A., 2007. "Strategy in contests: an introduction [Strategie in Turnieren – eine Einführung]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, WZB Berlin Social Science Center.
    4. P Belleflamme & P M Picard, 2003. "Competition over Piratable Goods," Economics Discussion Paper Series 0332, Economics, The University of Manchester.
    5. Münster, Johannes, 2005. "Lobbying contests with endogenous policy proposals," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 41, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    6. Gil Epstein & Shmuel Nitzan, 2006. "The Politics of Randomness," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 27(2), pages 423-433, October.
    7. Shin-yi Wu & Pei-yu Chen, 2008. "Versioning and Piracy Control for Digital Information Goods," Operations Research, INFORMS, vol. 56(1), pages 157-172, February.
    8. Gil Epstein & Igal Milchtaich & Shmuel Nitzan & Mordechai Schwarz, 2007. "Ambiguous political power and contest efforts," Public Choice, Springer, vol. 132(1), pages 113-123, July.
    9. Drook-Gal, Bat-Sheva & Epstein, Gil S. & Nitzan, Shmuel, 2004. "Contestable privatization," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 377-387, July.
    10. Philipp Denter & Dana Sisak, 2010. ""Who's the thief?": Asymmetric Information and the Creation of Property Rights," University of St. Gallen Department of Economics working paper series 2010 2010-27, Department of Economics, University of St. Gallen.
    11. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
    12. Münster, Johannes, 2005. "Lobbying contests with endogenous policy proposals [Lobby Wettkämpfe mit endogenen Politikvorschlägen]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2005-11, WZB Berlin Social Science Center.
    13. Gil Epstein & Shmuel Nitzan, 2006. "The struggle over migration policy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(4), pages 703-723, October.
    14. Ansink, Erik & Weikard, Hans-Peter, 2009. "Contested water rights," European Journal of Political Economy, Elsevier, vol. 25(2), pages 247-260, June.
    15. Santiago Sánchez‐Pagés, 2007. "Rivalry, Exclusion, and Coalitions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(5), pages 809-830, October.
    16. Gil S. Epstein & Ira N. Gang, 2006. "Contests, NGOs, and Decentralizing Aid," Review of Development Economics, Wiley Blackwell, vol. 10(2), pages 285-296, May.
    17. Elie Appelbaum & Eliakim Katz, 1986. "Transfer seeking and avoidance: On the full social costs of rent seeking," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 391-397, Springer.
    18. Hoffmann, Magnus, 2006. "Enforcement of Property Rights in a Barter Economy," MPRA Paper 3260, University Library of Munich, Germany.
    19. Konstantin Chatziathanasiou & Svenja Hippel & Michael Kurschilgen, 2020. "Property, Redistribution, and the Status Quo," Munich Papers in Political Economy 02, Munich School of Politics and Public Policy and the School of Management at the Technical University of Munich.
    20. María Cubel & Santiago Sanchez-Pages, 2020. "Property Out of Conflict: A Survey and Some New Results," Revue d'économie politique, Dalloz, vol. 130(6), pages 891-927.

    More about this item

    Keywords

    Digital Products; Contests; Security of Property Rights; Endogenous Monopoly Price;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

    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:pra:mprapa:3289. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.