Peitz and Waelbroeck (2006b)
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Source Details
Peitz and Waelbroeck (2006b) | |
Title: | Piracy of Digital Products: A Critical Review of the Theoretical Literature |
Author(s): | Peitz, M., Waelbroeck, P. |
Year: | 2006 |
Citation: | Peitz, M, and Waelbroeck, P. (2006). Piracy of Digital Products: A Critical Review of the Theoretical Literature. Information Economics and Policy, 18(4), 449–76. |
Link(s): | Open Access |
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About the Data | |
Data Description: | The study consists of a literature review of economic models of end-user copying. |
Data Type: | Secondary data |
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Cross Country Study?: | No |
Comparative Study?: | No |
Literature review?: | Yes |
Government or policy study?: | No |
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Abstract
“Digital products can be copied almost at no cost and are subject to non-commercial copying by final consumers. Because the copy of a copy typically does not deteriorate in quality, copies can become available on a large scale basis - this can be illustrated by the surge of file-sharing networks. In this paper we provide a critical overview of the theoretical literature that addresses the economic consequences of end-user copying. We analyze basic models of piracy, models with indirect appropriation, models with network effects, and models with asymmetric information. We discuss the applicability of the different modeling strategies to a number of industries such as software, video and computer games, music, and movies.”
Main Results of the Study
The effects of end-user copying are industry dependent. Whilst most models assume that end-user copying results in firms decreasing prices, and thus losing profit, network effects may in fact lead to increased profit. The study finds that in 3 out of 4 of the industry-types surveyed, those industries benefit from the existence of digital copies of their works.It is less clear to what extent the availability of digital copies increases overall welfare. The conclusion suggests that balance is needed between limiting distribution of digital copies and exploiting the benefits of network effects. This may involve refraining from anti-piracy measures in certain markets (e.g. experience goods) and actively encouraging end-user copying.
Policy Implications as Stated By Author
The study concludes that many open policy questions remain on the subject of end-user copying (including e.g. the optimal level of copyright protection, mechanisms which improve welfare etc.). In future, researchers should look to studying alternative (industry-specific) business models which may avoid the negative effects of copying (e.g. limited time distribution, sampling, product differentiation etc.).
Coverage of Study
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