|Title:||The Computer Generation's Willingness to Pay for Originals when Pirates are Present – A CV study|
|Citation:||Holm, H. J. (2001). The computer generation's willingness to pay for originals when pirates are present: A cv study. Lund University.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|Linked by:||Handke (2015)|
|About the Data|
|Data Description:||A selected group of 330 Swedish undergraduate students filled in a Contingent Valuation questionnaire. From this selection two subgroups consisting of 234 students were selected for the study. One group (social science undergraduates) is considered to be representative for university
undergraduates in Sweden and the other group (computer engineering undergraduates) belongs to the "elite" in terms of computer skills in their age group.
|Data Type:||Primary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
A contingent valuation method is applied to study subjects' willingness to pay for originals when illegal copies are freely available. The subjects consisted of 234 Swedish undergraduate students from the "computer generation". Only 2% of the "normal" (and 0% of the "elite") students were willing to pay the retail price for the original. However, the majority was prepared to pay a non-negligible amount for the original. Demand curves and profit maximizing behaviors are analyzed. The price elasticity of piracy indicates that piracy is insensitive to price cuts. The results have implications for the calculation of damages of piracy.
Main Results of the Study
- Only 2 % of the social science students are willing to pay the retail price if a copy is freely available, but the situation refers to a contingency where the subjects are supposed to be “very anxious” to get the program.
- Only 31% of the social science students have an additional willingness to pay for originals (AWTPO) that is less than SEK 100 for the original with the retail price of SEK 1000.
- Only 17% of the social science students have an AWTPO that is less than SEK 100 for the original with the retail price of SEK 3000.
Subjects that are more computer skilled have on average a lower AWTPO than subjects that are less computer skilled. Furthermore, this difference seems to increase with the retail price of the original.
- If the marginal cost were zero, optimal pricing would lead the firm to cut prices by 80%. Even if such a price cut were made almost 50% of the computer generation subjects would still get an illegal copy. If marginal cost is one fifth of the original retail price (i.e., SEK 200) optimal pricing lead the firm to cut prices by 50%. If this price cut were made 86% of the subjects would still get an illegal copy.
Policy Implications as Stated By Author
- The results have implications for the firms’ and authorities’ anti-piracy strategies. The price elasticity of piracy indicates that the piracy rate is quite insensitive to price cuts for most price intervals. This suggests that moderate price cuts are likely to be a rather inefficient method to fight piracy in the computer generation.
- The author found that although a pricing option exists, price cuts would hardly delimit piracy to a larger extent and the extra revenues earned from groups inclined to piracy would be low due to very low optimal prices. If we take into account incentive compatibility constraints from other market segments with higher prices and time consistency constraints then these mechanisms would make the price cuts even less profitable.
Coverage of Study
|Level of aggregation:||University students|
|Period of material under study:||Not stated|