The 'Invisible Hand' of Piracy: An Economic Analysis of the Information-Goods Supply Chain

MIS Quarterly, Vol. 42, No. 4, pp. 1117–1141 (2018)

Posted: 19 Apr 2014 Last revised: 6 Sep 2019

See all articles by Antino Kim

Antino Kim

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies

Atanu Lahiri

University of Texas Dallas

Debabrata Dey

University of Washington

Date Written: January 9, 2018

Abstract

We study the economic impact of piracy on the supply chain of information goods. When information goods are sold to consumers via a retailer, in certain situations, a moderate dose of piracy seems to have a surprising positive impact on the profits of the manufacturer and the retailer, while, at the same time, enhancing consumer welfare. Such a "win-win-win" situation is not only good for the overall supply chain, but is also beneficial for the overall economy. We argue that the economic rationale for this surprising result is rooted in how piracy interacts with the problem of double marginalization. We explain this rationale and develop useful insights for management and policy.

Keywords: Piracy, supply chain, retailer, double marginalization, digital goods, profit, welfare

Suggested Citation

Kim, Antino and Lahiri, Atanu and Dey, Debabrata, The 'Invisible Hand' of Piracy: An Economic Analysis of the Information-Goods Supply Chain (January 9, 2018). MIS Quarterly, Vol. 42, No. 4, pp. 1117–1141 (2018). Available at SSRN: https://ssrn.com/abstract=2426577 or http://dx.doi.org/10.2139/ssrn.2426577

Antino Kim

Indiana University - Kelley School of Business - Department of Operation & Decision Technologies ( email )

Business 670
1309 E. Tenth Street
Bloomington, IN 47401
United States
812.855.2905 (Phone)

Atanu Lahiri

University of Texas Dallas ( email )

University of Texas at Dallas
Richardson, TX 75080
United States

Debabrata Dey (Contact Author)

University of Washington ( email )

Foster School of Business
511 PACCAR Hall
Seattle, WA 98195-3226
United States
206-543-1855 (Phone)

HOME PAGE: http://faculty.washington.edu/ddey/

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