Piracy and Quality Choice in Monopolistic Markets

38 Pages Posted: 5 Nov 2002

See all articles by Elena Argentesi

Elena Argentesi

University of Bologna - Department of Economics

Matteo Alvisi

University of Bologna - Department of Economics

Emanuela Carbonara

University of Bologna - Department of Economics

Date Written: September 2002

Abstract

We study the impact of piracy on the quality choices of a monopolist. In the absence of piracy, the monopolist has no incentive to differentiate its products. With piracy the monopolist might instead produce more than one quality, so that differentiation arises as the optimal strategy. This is because the producer wants to divert consumers from the pirated good to the original one. Differentiation involves producing a low-quality good such that piracy is either reduced (albeit still observed in equilibrium) or even eliminated. The enforcement of copyright laws reduces the incentive to differentiate, stressing our result that differentiation is a reaction to piracy.

Keywords: Product differentiation, Multiproduct monopolist, Quality, Piracy

JEL Classification: L12, L15, L82, L86

Suggested Citation

Argentesi, Elena and Alvisi, Matteo and Carbonara, Emanuela, Piracy and Quality Choice in Monopolistic Markets (September 2002). Available at SSRN: https://ssrn.com/abstract=341960 or http://dx.doi.org/10.2139/ssrn.341960

Elena Argentesi

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, BO 40141
Italy
+39 051 209 8661 (Phone)
+39 051 209 8040 (Fax)

HOME PAGE: http://www2.dse.unibo.it/argentes/

Matteo Alvisi

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, BO 40126
Italy
+39 051 2092646 (Phone)
+39 051 2092664 (Fax)

Emanuela Carbonara (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy
+39 051 2098149 (Phone)
+39 051 2098040 (Fax)

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