Bae and Choi (2006)

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1. Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare 2. Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)? 3. Harmony of interest assumption between authors and publishers (creators and producers/investors) 4. Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption) 5. Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)

A. Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right) B. Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction) C. Mass digitisation/orphan works (non-use; extended collective licensing) D. Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability) E. Fair remuneration (levies; copyright contracts) F. Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Source Details

Bae and Choi (2006)
Title: A Model of Piracy
Author(s): Sang Hoo Bae and Jay Pil Choi
Year: 2005
Citation: Bae, Sang Hoo, and Jay Pil Choi. A model of piracy. Information Economics and Policy 18.3 (2006): 303-320.
Link(s): Definitive
Key Related Studies:
Discipline:
Linked by: Moores (2010)
About the Data
Data Description: This study considers the two types of costs associated with piracy: the reproduction cost that is constant across users and the degradation cost that is proportional to consumers’ valuation of the original product. The authors demonstrate that the effects of piracy depend crucially on the nature of piracy costs. The study also uses data on piracy levels published by the Business Software Alliance from 2004.
Data Type: Secondary data
Secondary Data Sources:
Data Collection Methods:
Data Analysis Methods:
Industry(ies):
Country(ies):
Cross Country Study?: Yes
Comparative Study?: Yes
Literature review?: No
Government or policy study?: No
Time Period(s) of Collection:
  • 1991 to 2007
Funder(s):

Abstract

This paper develops a simple model of software piracy to analyze the short-run effects of piracy on software usage and the long-run effects on development incentives. We consider two types of costs associated with piracy: the reproduction cost that is constant across users and the degradation cost that is proportional to consumers’ valuation of the original product. We show that the effects of piracy depend crucially on the nature of piracy costs. Policy implications concerning copyright protection are also discussed.

Main Results of the Study

We demonstrate that with the threat of piracy the monopolist’s price is lowered, and usage of an authorized copy is increased in both regimes with positive welfare implications. This result provides a sharp contrast to the common claims of copyright holders, in which the possibility of piracy reduces demand for a legal copy.

Policy Implications as Stated By Author

  • An increase in the level of piracy can lead to an increase in demand for the legitimate good.
  • This is in opposition to what many copyright holders argue.


Coverage of Study

Coverage of Fundamental Issues
Issue Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Green-tick.png
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
Harmony of interest assumption between authors and publishers (creators and producers/investors)
Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption)
Green-tick.png
Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)
Coverage of Evidence Based Policies
Issue Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction)
Mass digitisation/orphan works (non-use; extended collective licensing)
Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability)
Fair remuneration (levies; copyright contracts)
Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)
Green-tick.png

Datasets

Sample size: 2
Level of aggregation: Two types of costs associated with piracy
Period of material under study: 1991 - to 2007


Sample size: 1
Level of aggregation: Piracy data
Period of material under study: 2004