Hoffmann, Magnus and Schmidt, Frederik (2007): Piracy of Digital Products: A Contest Theoretical Approach.
Download (226kB) | Preview
In the following, we examine a market of a digital consumption good with monopolistic supply. In this market, it is the ability of the consumer to bypass (”crack”) the copy-protection of the monopolist which induces a lower price of the digital good, compared to an uncontested monopoly (textbook case). We analyze the complex relationship between the cracking efforts of the consumer, the copy-protection efforts and the pricing decision of the monopolist, and the welfare of the economy. We find, for example, that the monopolist will deter piracy if the (exogenous) relative effectiveness of the consumer’s bypassing activity is low compared to the copy-protection technology. In this case welfare is lower than the welfare in the textbook case. On the contrary, welfare rises above the textbook case level if the relative effectiveness of cracking is sufficiently high.
|Item Type:||MPRA Paper|
|Institution:||Johannes-Gutenberg University, Mainz|
|Original Title:||Piracy of Digital Products: A Contest Theoretical Approach|
|Keywords:||Digital Products; Contests; Security of Property Rights; Endogenous Monopoly Price|
|Subjects:||D - Microeconomics > D4 - Market Structure, Pricing, and Design > D42 - Monopoly
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property Rights
|Depositing User:||Magnus Hoffmann|
|Date Deposited:||21. May 2007|
|Last Modified:||08. May 2015 10:13|
Allard, R. J., 1988. Rent-seeking with non-identical players. Public Choice 57, 3–14.
Bain, J. S., 1956. Barriers to New Competition. Cambridge, Mass.: Havard University Press.
Belleflamme, P., September 2002. Pricing information goods in the presence of copying. Working Paper, No. 463, Queen Mary University of London.
Dixit, A., May 1982. Recent developments in oligopoly theory. The American Economic Review, Papers and Proceedings of the Ninety-Fourth Annual Meeting of the American Economic Association 72 (2), 12–17.
Epstein, G. S., Nitzan, S., 2002. The social cost of rent seeking when consumer opposition influences monopoly behaviour. European Journal of Political Economy 19, 61–9.
Epstein, G. S., Nitzan, S., 2003. Political culture and monopoly price determination. Social Choice and Welfare 21, 1–19.
Epstein, G. S., Nitzan, S., 2004. Strategic restraint in contests. European Economic Review 48, 201–210.
Gradstein, M., March 1995. Intensity of competition, entry and entry deterrence in rent seeking contests. Economics and politics 7 (1), 79–91.
Grossman, H. I., 2001. The creation of effective property rights. American Economic Review 91 (2), 347–352.
Grossman, H. I., Kim, M., December 1995. Swords or plowshares? a theory of the security of claims to property. The Journal of Political Economy 103 (6), 1275–88.
Leidy, M. P., July 1994. Rent dissipation through self-regulation: The social cost of monopoly under threat of reform. Public Choice 80, 105–28.
Modigliani, F., 1958. New developments on the oligopoly front. Journal of Political economy 66, 215–32.
Peitz, M., Waelbroeck, P., 2003. Piracy of digital products: A critical review of the economics literature. CESifo Working Paper, No. 1071.
Sylos Labini, P., 1962. Oligopoly and Technical Progress. Cambridge, Mass.: Havard University Press. 25
Available Versions of this Item
- Piracy of Digital Products: A Contest Theoretical Approach. (deposited 21. May 2007) [Currently Displayed]