Piracy and competition

Paul Belleflamme () and Pierre M. Picard ()

No 2005057, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: The effects of (private, small-scale) piracy on the pricing behavior of producers of information goods are studied within a unified model of vertical differentiation. Although information goods are assumed to be perfectly differentiated, demands are interdependent because the copying technology exhibits increasing returns to scale. We characterize the Bertrand-Nash equiliria in a duopoly. Comparing equilibrium prices to the prices set by a multiproduct monopolist, we show that competition drives prices up and may lead to price dispersion. Competition reduces total surplus in the short run but provides higher incentives to create in the long run.

Keywords: Information goods; piracy; copyright; pricing (search for similar items in EconPapers)
JEL-codes: L13 L82 L86 K11 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cul, nep-law, nep-mkt, nep-net and nep-reg
Date: 2005-09-30

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http://sites.uclouvain.be/econ/DP/IRES/2005-57.pdf (application/pdf)

Related works:
Working Paper: Piracy and Competition (2004)
Working Paper: Piracy and competition (2005)
Journal Article: Piracy and Competition (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:ctl:louvec:2005057

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