Piracy of Digital Products: A Contest Theoretical Approach
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.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Peitz & Patrick Waelbroeck, 2003. "Piracy of Digital Products: A Critical Review of the Economics Literature," CESifo Working Paper Series 1071, CESifo Group Munich.
- Herschel I. Grossman, 2001.
"The Creation of Effective Property Rights,"
American Economic Review,
American Economic Association, vol. 91(2), pages 347-352, May.
- Dixit, Avinash, 1982. "Recent Developments in Oligopoly Theory," American Economic Review, American Economic Association, vol. 72(2), pages 12-17, May.
- Gil S. Epstein & Shmuel Nitzan, 2003.
"Political culture and monopoly price determination,"
Social Choice and Welfare,
Springer, vol. 21(1), pages 1-19, 08.
- Gil S. Epstein & Shmuel Nitzan, 2002. "Political Culture and Monopoly Price Determination," CESifo Working Paper Series 646, CESifo Group Munich.
- Epstein, Gil S. & Nitzan, Shmuel, 2004.
"Strategic restraint in contests,"
European Economic Review,
Elsevier, vol. 48(1), pages 201-210, February.
- 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 105-28, July.
- Paul Belleflamme, 2002. "Pricing Information Goods in the Presence of Copying," Working Papers 463, Queen Mary University of London, School of Economics and Finance.
- Richard Allard, 1988. "Rent-seeking with non-identical players," Public Choice, Springer, vol. 57(1), pages 3-14, April.
- 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.
- 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 1275-88, December.
- Franco Modigliani, 1958. "New Developments on the Oligopoly Front," Journal of Political Economy, University of Chicago Press, vol. 66, pages 215.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:3289. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.