We analyze the behavior of a multiproduct monopolist, a duopolist and consumers who are able to learn by copying. We show that when the effect of learning by copying is strong and the cost of copying is low enough, consumers decide to copy all goods, independently of their prices. This suggests that the DRM systems implemented by the digital industry have adverse consequences, because they hinder the use of original information goods and provide consumers with an incentive for copying. Moreover, we obtain two more kinds of equilibrium: one where each firm sells to the consumer who values its good more highly and another where each firm sells to all consumers. These results are robust when we consider that consumers’ preferences are “opposed.” Finally, by analyzing social welfare we show that, from a static perspective, the multiproduct monopoly provides a welfare at least as great as the duopoly and, from a dynamic perspective, a duopolist has at least the same incentive to create a new product as a monopolist.
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Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number
08/05.
Find related papers by JEL classification: K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
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