Digital Piracy, Teens, and the Source of Advice: An Experimental Study

Abstract

The objective of our paper is to determine the effect of piracy advice from various sources on music consumer behavior. Specifically, does it matter if the source of advice has a stake in the outcome of the piracy decision? Does it matter if the source of advice has a social tie with the advisee? Accordingly, we conduct a lab experiment using teenagers and their parents as subjects, increasing the realism of the context by sampling potential pirates and their parents. Treatments represent various sources of piracy advice (e.g., the teen’s parent, a record label, or an external regulator). Subjects make decisions playing our new experimental game – The Piracy Game – extended from the volunteer’s dilemma literature. Interestingly, subjects respond negatively to advice from record labels over time, purchasing fewer songs as compared to other sources such as the subject’s parent. The existence of a social tie between the advisor and the subject assists in mitigating piracy, especially when a parent is facing potential penalties due to his/her child’s behavior. An external regulator, having no social tie or stake in the decision, provides the least credible source of advice, leading to the greatest amount of piracy. Our analyses not only provide managerial insights but also develop theoretical understanding of the role of social ties in the context of advice.

Keywords: piracy, advice, communication, experimental economics, volunteer’s dilemma