Pricing information goods with piracy and heterogeneous consumers
We present an information good pricing model with persistently heterogeneous consumers and a rising marginal propensity for them to pirate. Three offsetting pricing mechanisms occur: skimming, compressing price changes, and delaying product launch. We identify a novel trade off in piracy's effect on welfare. We find that piracy quickens sales times and raises welfare in fixed capacity markets, and does the opposite in growing markets. In our model, consumers benefit from piracy except at very high rates in rapidly expanding markets, legal sellers always dislike it, and pirate providers like high but not very high rates. Purchase delay, transient heterogeneity, inelastic demand, and network externalities reduce piracy's effect, but demand uncertainty doesn't.
|Date of creation:||12 May 2013|
|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.:
- Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
- Herings P. Jean-Jacques & Peeters Ronald & Yang Michael S., 2009. "Piracy on the internet: Accommodate it or fight it? A dynamic approach," Research Memorandum 034, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
- Cremer, Helmuth & Pestieau, Pierre, 2009.
"Piracy prevention and the pricing of information goods,"
Information Economics and Policy,
Elsevier, vol. 21(1), pages 34-42, February.
- CREMER, Helmuth & PESTIEAU, Pierre, 2006. "Piracy prevention and the pricing of information goods," CORE Discussion Papers 2006018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Helmuth Cremer & Pierre Pestieau, 2009. "Piracy prevention and the pricing of information goods," Post-Print halshs-00754396, HAL.
- Cremer, Helmuth & Pestieau, Pierre, 2006. "Piracy Prevention and the Pricing of Information Goods," CEPR Discussion Papers 5556, C.E.P.R. Discussion Papers.
- Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 155-166, June.
- Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-174, February.
- Khouja, Moutaz & Smith, Michael Alan, 2007. "Optimal pricing for information goods with piracy and saturation effect," European Journal of Operational Research, Elsevier, vol. 176(1), pages 482-497, January.
- Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-246, April.
- Paul Belleflamme, 2002. "Pricing Information Goods in the Presence of Copying," Working Papers 463, Queen Mary University of London, School of Economics and Finance.
- Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics (QME), Springer, vol. 5(3), pages 239-292, September.
- Nair, Harikesh S., 2006. "Intertemporal Price Discrimination with Forward-Looking Consumers: Application to the US Market for Console Video-Games," Research Papers 1947, Stanford University, Graduate School of Business.
- Besen, Stanley M., 1986. "Private copying, reproduction costs, and the supply of intellectual property," Information Economics and Policy, Elsevier, vol. 2(1), pages 5-22.
- Yoon, Kiho, 2002. "The optimal level of copyright protection," Information Economics and Policy, Elsevier, vol. 14(3), pages 327-348, September.
- Geroski, P. A., 2000. "Models of technology diffusion," Research Policy, Elsevier, vol. 29(4-5), pages 603-625, April.
- Geroski, Paul A, 1999. "Models of Technology Diffusion," CEPR Discussion Papers 2146, C.E.P.R. Discussion Papers.
- Besen, Stanley M & Kirby, Sheila Nataraj, 1989. "Private Copying, Appropriability, and Optimal Copying Royalties," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 255-280, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:46918. 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.