Piracy and Competition

37 Pages Posted: 17 Dec 2004  

Paul Belleflamme

GREQAM; CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Pierre M. Picard

Centre de Recherche en Économie Appliquée (CREA); Universite du Luxembourg

Multiple version iconThere are 2 versions of this paper

Date Written: November 2005

Abstract

The effects of (private, small-scale) piracy on the pricing behavior of producers of information goods are studied within a unified model of vertical differentiation. Although information goods are assumed to be perfectly differentiated, demands are interdependent because the copying technology exhibits increasing returns to scale. We characterize the Bertrand-Nash equilibria in a duopoly. Comparing equilibrium prices to the prices set by a multiproduct monopolist, we show that competition drives prices up and may lead to price dispersion. Competition reduces total surplus in the short run but provides higher incentives to create in the long run.

Keywords: information goods, piracy, copyright, pricing

JEL Classification: L13, L82, L86, K11, O34

Suggested Citation

Belleflamme, Paul and Picard, Pierre M., Piracy and Competition (November 2005). CESifo Working Paper Series No. 1350. Available at SSRN: https://ssrn.com/abstract=637186

Paul Belleflamme (Contact Author)

GREQAM ( email )

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CORE and Louvain School of Management, UCL (Université Catholique de Louvain) ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Pierre M. Picard

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

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