Economic Implications of Variable Technology Standards for Movie Piracy in a Global Context

Abstract

Even if bandwidth on the Internet is limited, compression technologies have made online music piracy a foremost problem in intellectual copyright protection. However, due to significantly larger sizes of video files, movies are still largely pirated by duplicating DVDs, VCDs, and other physical media. In the case of DVDs, movie studios have historically maintained different technology codes or formats across various regions of the world, primarily to control the timings of theatrical releases in these parts of the world. This paper formulates an analytical model to study the implications of maintaining different or incompatible technology standards in DVD and other optical disc players on global pricing and piracy of movie discs. Our formulation develops two distinct piracy types, namely, regional and global piracy, signifying if consumers will pirate movies released for their own region or those meant for other regions. Our results find that maintaining separate technology standards is very critical when there is piracy as losses from global piracy can be higher than when only regional piracy exists. Further, we observe that piracy is not a victimless crime in that not only do producers suffer losses but consumers in regions with high willingness-to-pay for quality also stand to lose. In addition, we find that in-

Impact of heterogeneity and socioeconomic factors on individual behavior in decentralized sharing ecosystems

“…Our study also provides important insights concerning the ongoing disputes between creative industries and P2P users (30)(31)(32)(33)(34). First, opportunity to download does not in itself seem to lead to an increase in the amount of P2P exchanges.…”

Managing Piracy: Pricing and Sampling Strategies for Digital Experience Goods in Vertically Segmented Markets

“…Piracy can also potentially affect the segmentation strategy of the vendor. Note that a common strategy to mitigate piracy losses is to lower prices (Chellappa and Shivendu 2003a); however, the strategy of lowering or changing prices is itself constrained by price boundaries that are needed to maintain segmentation. Hence, before we develop any price-related strategies, we first need to identify the portions of consumers who will change their piracy/buying behavior due to the updating of their fit in the second stage.…”

“…An important difference between physical experience goods (as modeled by research in economics) and digital experience goods (as modeled in this paper) is that the latter offers two possible consumption channels to the consumers to update their belief on the experience part of the good: buying and piracy. When pirating, consumers do not incur a monetary cost but depending upon individual specific factors (age, gender, and other ethical indices), they are known to suffer an internal cost of committing an illegal activity (Solomon and O'Brien 1991) captured by a construct called the moral cost of pirating (Chellappa and Shivendu 2003a). This is given by a parameter ∼ U 0 , where consumers closer to suffer a high moral cost representing the most moral individuals with the least ethical propensity to pirate (Gopal and Sanders 1997).…”

“…Recent analytical work (Chellappa and Shivendu 2003a) has abstracted the above nonprice deterrence factors through consumers' moral cost of pirating and expected punitive costs. We extend this model to include a recent empirical observation that the second most important reason why consumers pirate is their need to "try out" (Cheng et al 1997), suggesting that some piracy could have been prevented if some other legitimate means of "trying out" was provided.…”

“…While recent research (Sundararajan 2004) has studied price discrimination under piracy albeit through a quantity-price schedule, we adopt a classical verticalsegmentation approach and model a quality-price schedule (contract) along the lines of Chellappa and Shivendu (2003a). It is known that pricing of physical experience goods whose valued attributes cannot be fully ascertained before consumption needs to take into account the initial information or knowledge that consumers may have about them (Liebeskind and Rumelt 1989), and that differential pricing strategies are needed when a market overestimates versus underestimates the valued attribute (Shapiro 1983).…”