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Learning by Copying

Francisco Martínez-Sánchez ()

No 08/05, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: We analyze the behavior of a multiproduct monopolist, a duopolist and consumers who are able to learn by copying. We show that when the effect of learning by copying is strong and the cost of copying is low enough, consumers decide to copy all goods, independently of their prices. This suggests that the DRM systems implemented by the digital industry have adverse consequences, because they hinder the use of original information goods and provide consumers with an incentive for copying. Moreover, we obtain two more kinds of equilibrium: one where each firm sells to the consumer who values its good more highly and another where each firm sells to all consumers. These results are robust when we consider that consumers’ preferences are “opposed.” Finally, by analyzing social welfare we show that, from a static perspective, the multiproduct monopoly provides a welfare at least as great as the duopoly and, from a dynamic perspective, a duopolist has at least the same incentive to create a new product as a monopolist.

Keywords: Consumers; Learning by Copying; Opposed Preferences; DRM; Copy; Piracy. (search for similar items in EconPapers)
JEL-codes: K42 L11 L86 O34 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2008-06-13
New Economics Papers: this item is included in nep-com, nep-law, nep-mic and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:gra:wpaper:08/05

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