Harbaugh and Khemka (2010)
Contents
Source Details
| Harbaugh and Khemka (2010) | |
| Title: | Does Copyright Enforcement Encourage Piracy? |
| Author(s): | Harbaugh, R., Khemka, R. |
| Year: | 2010 |
| Citation: | Harbaugh, Rick, and Rahul Khemka. Does Copyright Enforcement Encourage Piracy?. The Journal of Industrial Economics 58.2 (2010): 306-323. |
| Link(s): | Definitive |
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| About the Data | |
| Data Description: | This study compares two levels of copyright enforcement: one targeting high-value customers and ignoring infringement taking place in other markets, the other utilising tighter enforcement across markets. The study examines the resulting effects on surplus and social welfare using a proposed economic model. The study uses data from the Business Software Alliance on levels of piracy and a literature review. |
| Data Type: | Secondary data |
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| Cross Country Study?: | Yes |
| Comparative Study?: | Yes |
| Literature review?: | No |
| Government or policy study?: | No |
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Abstract
When copyright enforcement is targeted at high-value buyers such as corporate and government users, the copyright holder charges super- monopoly prices, thereby encouraging low-value buyers to switch to inferior pirated copies. We show that enlarging the copyright holder's captive market through more extensive copyright enforcement reduces prices toward the monopoly level, increases sales of legitimate copies and can increase consumer surplus. Therefore, in contrast with the case of more intensive copyright enforcement, more extensive copyright enforcement over some range can increase the incentive to generate intellectual property while also reducing the loss to consumers from monopoly power.
Main Results of the Study
Broad-based and targeted copyright enforcement have very different implications for firm pricing strategies, piracy and social welfare. We have focused on copyright enforcement, but targeted enforcement may also be relevant for patent and trademark enforcement.Enforcement imposes a piracy cost which can be viewed as either paid by the bootleggers or by the consumers of pirated copies. In either case, consumer receives surplus from acquiring a pirated copy in the competitive bootlegger market. Targeted enforcement of copyright towards high value customers while allowing piracy for the low value customers allows surplus to flow to both copyright holder and consumer - copyright holder in the form of protecting the income for the legitimate copy and consumers overall as the existence of pirated copies ensures the legitimate copy is priced lower due to the competition.
Policy Implications as Stated By Author
- Proposition 1: Enforcement targeted at high- value buyers raises the legitimate copy price and decreases consumer surplus, and increases piracy.* Proposition 2. More extensive enforcement lowers the legitimate copy price and reduces piracy generally and increases consumer surplus if pirated copies are sufficiently poor substitutes for legitimate copies. * Proposition 3. If price discrimination between captive and non-captive markets is possible, more extensive enforcement lowers the captive market price and the non-captive market discounted price and reduces piracy generally. * Proposition 4. More intensive broad-based enforcement raises the legitimate copy price, decreases consumer surplus, and reduces piracy.
Coverage of Study
Datasets
| Sample size: | 2 |
| Level of aggregation: | Enforcement of copyright models |
| Period of material under study: | 1989 to 2005 |
| Sample size: | 1 |
| Level of aggregation: | Individual data |
| Period of material under study: | 2000 |
