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Peer‐to‐Peer File Sharing and the Market for Digital Information Goods

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  • Ramon Casadesus‐Masanell
  • Andres Hervas‐Drane

Abstract

We study competitive interaction between two alternative models of digital content distribution over the Internet: peer‐to‐peer (p2p) file sharing and centralized client–server distribution. We present microfoundations for a stylized model of p2p file sharing where all peers are endowed with standard preferences and show that the endogenous structure of the network is conducive to sharing by a significant number of peers, even if sharing is costlier than freeriding. We build on this model of p2p to analyze the optimal strategy of a profit‐maximizing firm, such as Apple, that offers content available at positive prices. We characterize the size of the p2p network as a function of the firm's pricing strategy, and show that the firm may be better off setting high prices, allowing the network to survive, and that the p2p network may work more efficiently in the presence of the firm than in its absence.

Suggested Citation

  • Ramon Casadesus‐Masanell & Andres Hervas‐Drane, 2010. "Peer‐to‐Peer File Sharing and the Market for Digital Information Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 333-373, June.
    • Handle: RePEc:bla:jemstr:v:19:y:2010:i:2:p:333-373
    DOI: 10.1111/j.1530-9134.2010.00254.x
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    References listed on IDEAS

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    Cited by:

    1. Ramon Casadesus-Masanell & Feng Zhu, 2010. "Strategies to Fight Ad-Sponsored Rivals," Management Science, INFORMS, vol. 56(9), pages 1484-1499, September.
    2. Ramon Casadesus-Masanell & Gastón Llanes, 2011. "Mixed Source," Management Science, INFORMS, vol. 57(7), pages 1212-1230, July.
    3. Chang, Yang-Ming & Walter, Jason, 2015. "Digital piracy: Price-quality competition between legal firms and P2P network hosts," Information Economics and Policy, Elsevier, vol. 31(C), pages 22-32.
    4. Hanna Halaburda & Mikołaj Jan Piskorski & Pınar Yıldırım, 2018. "Competing by Restricting Choice: The Case of Matching Platforms," Management Science, INFORMS, vol. 64(8), pages 3574-3594, August.
    5. Karl Taeuscher, 2019. "Uncertainty kills the long tail: demand concentration in peer-to-peer marketplaces," Electronic Markets, Springer;IIM University of St. Gallen, vol. 29(4), pages 649-660, December.

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