Reference : Piracy and Competition
Scientific journals : Article
Business & economic sciences : Economic systems & public economics
Piracy and Competition
Belleflamme, Paul mailto [Center for Operations Research and Econometrics - CORE > > > ; Université Catholique de Louvain - UCL]
Picard, Pierre M mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Journal of Economics and Management Strategy
Blackwell Publishing
Yes (verified by ORBilu)
[en] 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.

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