Managing Online Piracy in Platform: Pricing and Platform Protection

34 Pages Posted: 5 Jun 2020

See all articles by Zhiyong Li

Zhiyong Li

State Key Laboratory of Media Convergence and Communication; School of Economics and Management, Communication University of China

Guofang Nan

Tianjin University; Tianjin University - College of Management and Economics

Minqiang Li

Tianjin University - College of Management and Economics

Yong Tan

University of Washington - Michael G. Foster School of Business

Date Written: May 7, 2020

Abstract

Most digital content distributed in information-goods platforms encounter the threat of online piracy. Strategic pricing, technology-based platform protection, and deterrent enforcement such as legal and moral measures are viewed as antidotes to piracy. We examine the effects of deterrent enforcement on platform protection and price choices. We develop an analytical model in which the content provider determines the price of content and the platform determines the platform protection. We find that platform protection and deterrent enforcement establish different relationships, depending on the context—complementation in the piracy region, substitution in the threat region with positive platform protection, and independence with zero platform protection in the remaining regions. Surprisingly, when the deterrent enforcement is moderately high, if platform protection is adopted, the optimal price is larger than the monopoly price in the no-piracy region without threat. More surprisingly, in the same deterrent enforcement region, if the platform executes the platform protection, the users, content provider, and platform all will fall into a middle-protection trap. In other words, a “win-win-win” result would arise if the platform gives up its protection.

Keywords: Platform Protection, Piracy, Information Goods, Pricing, Deterrent Enforcement, Platform Ecosystem

Suggested Citation

Li, Zhiyong and Nan, Guofang and Nan, Guofang and Li, Minqiang and Tan, Yong, Managing Online Piracy in Platform: Pricing and Platform Protection (May 7, 2020). Available at SSRN: https://ssrn.com/abstract=3594976 or http://dx.doi.org/10.2139/ssrn.3594976

Zhiyong Li (Contact Author)

State Key Laboratory of Media Convergence and Communication ( email )

No.1 Dingfuzhuang East Street Chaoyang District
Beijing, 100024
China

School of Economics and Management, Communication University of China ( email )

No.1 Dingfuzhuang East Street Chaoyang District
Beijing, 100024
China

Guofang Nan

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Minqiang Li

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Yong Tan

University of Washington - Michael G. Foster School of Business ( email )

Box 353226
Seattle, WA 98195-3226
United States

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