DOES COPYRIGHT ENFORCEMENT ENCOURAGE PIRACY?

Authors


  • *We are grateful to the Editor and two anonymous referees for helpful suggestions. We also thank Eric Helland, Ivan Png, Eric Rasmusen, Janet Smith, David Waterman and participants at the Allied Social Science Association meetings for comments and suggestions.

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.

Ancillary