A Preach for a Breach: Promoting Copyright Infringements as an Optimal Monopolistic Behavior

Abstract

We discuss and formally show a multi-period equilibrium in which, counter to preliminary intuition, a creator of a work, motivated by economic considerations, promotes breach of his own copyrights. In effect, by selectively enforcing copyrights, the creator is allegedly indirectly involved in predatory pricing, thereby, raising barriers to entry. We particularly refer to the software industry where the described phenomenon is likely due to the relatively high entry cost on the one hand, and the relatively low copyright infringement cost on the other hand. We further show the conditions under which an exogenous intervention by way of intensive enforcement of copyrights increases social wealth.

JEL Classification: K21, L12, L41, O34