The 'Invisible Hand' of Piracy: An Economic Analysis of the Information-Goods Supply Chain

Kim, Antino; Lahiri, Atanu; Dey, Debabrata

doi:10.2139/ssrn.2426577

Cited by 8 publications

(6 citation statements)

References 37 publications

(59 reference statements)

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“…In effect, there are two monopolists: the producer, here HBO, who is the only supplier of the product Game of Thrones and who then enters into a monopoly distribution agreement. In such cases of double marginalization, the profits of both monopolists increase the price to the consumer and reduce the consumer surplus (Kim et al, 2014). However, as Kim et al demonstrate, piracy can, in these circumstances, make for a more efficient market: ‘what piracy provides is a really close proxy – it introduces a shadow competition for the manufacturer and retailer, providing an alternative, a closely related version of the good to the consumer’ (2014: 18).…”

Section: Market Dynamicsmentioning

confidence: 99%

Torrenting Game of Thrones

MacNeill

2016

Convergence

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This article examines the views expressed by Australians relating to unauthorized digital access to the popular HBO series Game of Thrones. A detailed analysis is undertaken of the online responses to a 2013 Facebook post by the United States Ambassador to Australia, chastizing Australians for their ‘illegal’ behaviour. This analysis is used to critique the dominant framing of the activities of file-sharing, torrenting and unauthorized downloading as criminal and those involved in the activity as being influenced by sociological factors. In contrast, the research found that many of the justifications for these behaviours contained in the Facebook comments demonstrated an informed critique of the market mechanisms at work in the distribution networks.

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Section: Market Dynamicsmentioning

confidence: 99%

Torrenting Game of Thrones

MacNeill

2016

Convergence

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“…Although digital content sold in the downloadable format is growing, physical discs remain as the dominant distribution format. For instance, 241.4 million music albums were sold in the United States in 2015, of which CD sales were 125.6 million, accounting for 52% [16]. In the film industry, digital video discs (DVDs), including the Blu-ray format, continue to be the largest source of revenue.…”

mentioning

confidence: 99%

“…The producer can invest in copyright protection to reduce consumer valuations of the pirated version. Following previous research [4,18,11,16], we assume that the reduced valuation is proportional to the licensed digital content's valuation. Some practices can support this assumption: (1) The producer can invest the hardware-based piracy control, such as nonstandard disks, coder cards, and hardware locks [10], thus decreasing the pirated digital content's quality and consumption value.…”

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confidence: 99%

Managing piracy: Dual-channel strategy for digital contents

Chai¹,

Ren²,

Zhang³

2022

JIMO

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The Internet offers digital content disc producers the opportunities to design dual channels by introducing an online-direct store alongside traditional retail stores, but also leads related firms to suffer significant piracy problems. Using a game-theoretic framework, we explore dual-channel marketing optimality as a piracy-mitigating strategy for digital content sold in the physical disc format. We construct a price-setting game between a digital content producer and its independent retailer(s) in a pirated market by endogenizing the producer's copyright protection investments. We show that dual-channel marketing, a complement or a substitute for conventional copyright protection, can strategically mitigate the piracy level by increasing the equal-size retail sales volume. We also investigate how firms' pricing strategies and profits are influenced by the endogenous interaction of dual-channel marketing and copyright protection. We unexpectedly find that in a pirated market with insufficient copyright protection, dual-channel marketing can simultaneously raise firm pricing and sales volumes when the producer sells through a monopolistic retailer. We also identify the conditions under which dual-channel marketing can mitigate profit losses caused by piracy for the producer and the retailer(s). Unlike previous research which shows that dual-channel marketing benefits the producer and the monopolistic retailer because it mitigates double marginalization, in the pirated market, this win-win outcome occurs even if accompanied by aggravated double marginalization. Moreover, dual-channel marketing can mitigate all the firms' profit losses caused by piracy only when it can complement conventional copyright protection, i.e., when the producer sells through a monopolistic retailer or duopolistic retailers. In each situation, counter-intuitively, as copyright protection becomes increasingly costly, although the retailer(s) is (are) more willing to accept dual-channel marketing, the producer has a decreased incentive to design such sales channels.

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“…For example, piracy may raise a consumer base and increase firm profitability in the presence of positive demand-side externalities, such as the network effect and the word-of-mouth effect [7,11,15,40,41,44]. In the absence of positive demand-side externalities, Jain [20], Lahiri and Dey [31], Guo and Meng [13], and Kim et al [27] reveal the positive impacts of piracy or anti-protection policies by considering competitive producers, heterogeneous consumers, consumer search behavior and distribution supply chain, respectively.…”

mentioning

confidence: 99%

“…They show that supply-side piracy enforcement has a more desirable economic impact in the long run, while demand-side piracy enforcement may damage social welfare. Kim et al [27] reveal the impacts of digital content piracy in a distribution supply chain. They explain that piracy can simultaneously benefit the digital content producer, the retailer, and consumers by mitigating double marginalization.…”

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confidence: 99%

The impacts of digital content piracy and copyright protection policies when consumers are loss averse

Chai

Ren

Zhang

2022

JIMO

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<p style='text-indent:20px;'>Recent technological advances in digitization and online communications have enabled unauthorized reproduction and illegal file-sharing. However, controversies still exist over the impacts of digital content piracy and copyright protection policies. Using a game-theoretic framework, we examine the impacts of digital content piracy and copyright protection policies on product quality, firm profitability, consumer surplus, and social welfare when consumers exhibit loss aversion in the quality dimension. Specifically, consumers are initially uncertain about the product quality and will form an expectation, but once they buy the licensed product or use piracy, they know the actual product quality and compare it with their expectation. When consumers are loss averse, consumer propensity to an option is more negatively affected by product quality above the expectation than positively affected by product quality below the expectation. Our analysis shows that although piracy exerts a negative cannibalization effect in the absence of loss aversion, it can exert an additional positive information effect when the degree of loss aversion on the licensed product is higher than the degree of loss aversion on piracy. We find that when the information effect dominates the cannibalization effect, piracy can lead to a win-win situation for firm profitability and consumer surplus. Moreover, under certain circumstances, anti-protection policies can simultaneously raise product quality, firm profitability and consumer surplus. The rationale behind the positive impacts of piracy and anti-protection policies is rooted in the influences of loss aversion behavior on consumer purchase decisions. The results show that it is essential to quantify the degree of consumer loss aversion for firms in formulating pricing and quality strategies and for policymakers to develop copyright protection policies.</p>

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The 'Invisible Hand' of Piracy: An Economic Analysis of the Information-Goods Supply Chain

Cited by 8 publications

References 37 publications

Torrenting Game of Thrones

Torrenting Game of Thrones

Managing piracy: Dual-channel strategy for digital contents

The impacts of digital content piracy and copyright protection policies when consumers are loss averse

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