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

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 onestage 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.

Market must be defended: The role of counter-espionage policy in protecting domestic market welfare

“…Only the participation of F 's firm in a market characterized by a ≥ a 1 generates a sufficiently high enough economic welfare to justify exerting the maximum effort in espionage activities as a response to sufficiently low enough efforts in the counter-espionage policy. 23 Consistently, δ < 1 is the upper bound for the range of C's counter-espionage efforts for which F is prepared to exert the maximum effort in espionage (0 ≤ c ≤ δ), and its increasing behavior with respect to a reflects that the higher the welfare implied by the characteristics of the market, the higher the range.…”

Time to Market and Impatient Customers

“…Another example could be those markets where commercial piracy exists, 1 i.e. where there is at least one illegal firm (which we call a ‘pirate’) that reproduces and sells copies of a new product which is developed by another firm (which we call the ‘incumbent’) and is copyrighted (Banerjee, 2003; Poddar, 2003; Martínez‐Sánchez, 2010; López‐Cuñat and Martínez‐Sánchez, 2011). In these markets the latest technological developments and the internet have enabled consumers to find a new product pirated before it is officially launched on the market.…”

Collusion, competition and piracy

“…Bae and Choi (2006) investigate the role of the reproduction cost of copies made by consumers without 1 See Peitz and Waelbroeck (2006) for a survey of piracy in which copies are made exclusively by end consumers. However, there is another literature that analyzes the case of a single firm that illegally makes copies and sells them on the market, which is known as commercial piracy (Martínez-Sánchez (2007) and López-Cuñat and Martínez-Sánchez (2009)). the authorization of producers.…”

“…López-Cuñat and Martínez-Sánchez (2009) prove that the initial quality differential between the original and the copy is critical. On the one hand, the standard wisdom showing that an increase in the quality of copy increases piracy should be reviewed.…”