Digital goods lend themselves to versioning but also suffer from piracy losses. This paper develops a pricing model for digital experience goods in a segmented market and explores the optimality of sampling as a piracy-mitigating strategy. Consumers are aware of the true fit of an experience good to their tastes only after consumption, and as piracy offers an additional (albeit illegal) consumption opportunity, traditional segmentation findings from economics and sampling recommendations from marketing, need to be revisited. We develop a two-stage model of piracy for a market where consumers are heterogeneous in their marginal valuation for quality and their moral costs. In our model, some consumers pirate the product in the first stage allowing them to update their fit-perception that may result in re-evaluation of their buying/pirating decision in the second stage. We recommend distinct pricing and sampling strategies for underestimated and overestimated products and suggest that any potential benefits of piracy can be internalized through product sampling. Two counterintuitive results stand out. First, piracy losses are more severe for products that do not live up to their hype rather than for those that have been undervalued in the market, thus requiring a greater deterrence investment for the former, and second, unlike physical goods where sampling is always beneficial for underestimated products, sampling for digital goods is optimal only under narrowly defined circumstances due to the price boundaries created by both piracy and segmentation.

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Even if bandwidth on the Internet is limited, compression technologies have made online music piracy a foremost problem in intellectual copyright protection. However, due to significantly larger sizes of video files, movies are still largely pirated by duplicating DVDs, VCDs, and other physical media. In the case of DVDs, movie studios have historically maintained different technology codes or formats across various regions of the world, primarily to control the timings of theatrical releases in these parts of the world. This paper formulates an analytical model to study the implications of maintaining different or incompatible technology standards in DVD and other optical disc players on global pricing and piracy of movie discs. Our formulation develops two distinct piracy types, namely, regional and global piracy, signifying if consumers will pirate movies released for their own region or those meant for other regions. Our results find that maintaining separate technology standards is very critical when there is piracy as losses from global piracy can be higher than when only regional piracy exists. Further, we observe that piracy is not a victimless crime in that not only do producers suffer losses but consumers in regions with high willingness-to-pay for quality also stand to lose. In addition, we find that in-

O nline personalization services belong to a class of economic goods with a "no free disposal" (NFD) property where consumers do not always prefer more services to less because of the privacy concerns. These concerns arise from the revelation of information necessary for the provision of personalization services. We examine vendor strategies in a market where consumers have heterogeneous concerns about privacy. In successive generalizations, we allow the vendor to offer a fixed level of personalization, variable levels of personalization, and monetary transfers (coupons) to the consumers that depend on the level of personalization chosen. We show that a vendor offering a fixed level of personalization does not offer a coupon unless his marginal value of information (MVI) is sufficiently high, and even when personalization is costless, the vendor does not cover the market. Under a fixed services offering, the vendor serves the same market with or without couponing. Next, we demonstrate that in the absence of couponing, the vendor's optimal variable personalization services contract maximizes surplus for all heterogeneous consumers, which is in contrast to standard results from monopolistic screening. When the vendor can offer coupons that vary according to personalization levels, the optimal contract is not fully revealing unless his MVI is high and he will not offer coupons when this MVI is low. However, a vendor with a moderate MVI (between certain thresholds) offers a bunched contract, wherein consumers with low privacy concerns receive a variable services-coupon contract, those with moderate privacy concerns receive a fixed services-coupon contract, and those with high privacy concerns do not participate in the market. The coupon value is decreasing in privacy sensitivity of consumers.

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