IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v65y2019i3p1173-1190.html
   My bibliography  Save this article

Online Piracy and the “Longer Arm” of Enforcement

Author

Listed:
  • Debabrata Dey

    (Foster School of Business, University of Washington, Seattle, Washington 98195)

  • Antino Kim

    (Kelley School of Business, Indiana University, Bloomington, Indiana 47405)

  • Atanu Lahiri

    (Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080)

Abstract

Controlling digital piracy has remained a top priority for manufacturers of information goods, as well as for many governments around the world. Among the many forms taken by digital piracy, we focus on an increasingly common one—namely, online piracy —that is facilitated by torrent sites and cyberlockers who bring together consumers of pirated content and its suppliers. Motivated by recent empirical literature that makes a clear distinction between antipiracy efforts that restrict supply of pirated goods ( supply-side enforcement) and ones that penalize illegal consumption ( demand-side enforcement), we develop a simple economic model and discover some fundamental differences between these two types in terms of their impacts on innovation and welfare. All in all, supply-side enforcement turns out to be the “longer arm”—it has a more desirable economic impact in the long run. Our results have clear implications for manufacturers, consumers, and policy makers.

Suggested Citation

  • Debabrata Dey & Antino Kim & Atanu Lahiri, 2019. "Online Piracy and the “Longer Arm” of Enforcement," Management Science, INFORMS, vol. 65(3), pages 1173-1190, March.
    • Handle: RePEc:inm:ormnsc:v:65:y:2019:i:3:p:1173-1190
    DOI: 10.1287/mnsc.2017.2984
    as

    Download full text from publisher

    File URL: https://doi.org/10.1287/mnsc.2017.2984
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2017.2984?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
    2. Sanjay Jain, 2008. "Digital Piracy: A Competitive Analysis," Marketing Science, INFORMS, vol. 27(4), pages 610-626, 07-08.
    3. Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn.
    4. Rob, Rafael & Waldfogel, Joel, 2006. "Piracy on the High C's: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 29-62, April.
    5. Monica Johar & Nanda Kumar & Vijay Mookerjee, 2012. "Content Provision Strategies in the Presence of Content Piracy," Information Systems Research, INFORMS, vol. 23(3-part-2), pages 960-975, September.
    6. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    7. Vickers, John, 1989. "The nature of costs and the number of firms at cournot equilibrium," International Journal of Industrial Organization, Elsevier, vol. 7(4), pages 503-509, December.
    8. Brett Danaher & Samita Dhanasobhon & Michael D. Smith & Rahul Telang, 2010. "Converting Pirates Without Cannibalizing Purchasers: The Impact of Digital Distribution on Physical Sales and Internet Piracy," Marketing Science, INFORMS, vol. 29(6), pages 1138-1151, 11-12.
    9. Ramnath K. Chellappa & Shivendu Shivendu, 2005. "Managing Piracy: Pricing and Sampling Strategies for Digital Experience Goods in Vertically Segmented Markets," Information Systems Research, INFORMS, vol. 16(4), pages 400-417, December.
    10. Aaron Baird & Chadwick J. Miller & T. S. Raghu & Rajiv K. Sinha, 2016. "Product Line Extension in Consumer Software Markets in the Presence of Free Alternatives," Information Systems Research, INFORMS, vol. 27(2), pages 282-301, June.
    11. Asher Wolinsky, 1983. "Retail Trade Concentration Due to Consumers' Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 275-282, Spring.
    12. Ram D. Gopal & Alok Gupta, 2010. "Trading Higher Software Piracy for Higher Profits: The Case of Phantom Piracy," Management Science, INFORMS, vol. 56(11), pages 1946-1962, November.
    13. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    14. Morris, Robert G. & Higgins, George E., 2010. "Criminological theory in the digital age: The case of social learning theory and digital piracy," Journal of Criminal Justice, Elsevier, vol. 38(4), pages 470-480, July.
    15. Shin-yi Wu & Pei-yu Chen, 2008. "Versioning and Piracy Control for Digital Information Goods," Operations Research, INFORMS, vol. 56(1), pages 157-172, February.
    16. Gene M. Grossman & Elhanan Helpman, 1993. "Innovation and Growth in the Global Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570971, April.
    17. Terrence August & Tunay I. Tunca, 2008. "Let the Pirates Patch? An Economic Analysis of Software Security Patch Restrictions," Information Systems Research, INFORMS, vol. 19(1), pages 48-70, March.
    18. Dinah A. Vernik & Devavrat Purohit & Preyas S. Desai, 2011. "Music Downloads and the Flip Side of Digital Rights Management," Marketing Science, INFORMS, vol. 30(6), pages 1011-1027, November.
    19. Anne Duchene & Patrick Waelbroeck, 2005. "Peer-to-peer, piracy and the copyright law: implications for consumers and artists," Chapters, in: Lisa N. Takeyama & Wendy J. Gordon & Ruth Towse (ed.), Developments in the Economics of Copyright, chapter 4, Edward Elgar Publishing.
    20. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    21. Luis Aguiar & Jorg Claussen & Christian Peukert, 2015. "Online Copyright Enforcement, Consumer Behavior, and Market Structure," JRC Working Papers on Digital Economy 2015-01, Joint Research Centre.
    22. Tunay I. Tunca & Qiong Wu, 2013. "Fighting Fire with Fire: Commercial Piracy and the Role of File Sharing on Copyright Protection Policy for Digital Goods," Information Systems Research, INFORMS, vol. 24(2), pages 436-453, June.
    23. Brett Danaher & Michael D. Smith & Rahul Telang & Siwen Chen, 2014. "The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France," Journal of Industrial Economics, Wiley Blackwell, vol. 62(3), pages 541-553, September.
    24. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
    25. Arun Sundararajan, 2004. "Managing Digital Piracy: Pricing and Protection," Information Systems Research, INFORMS, vol. 15(3), pages 287-308, September.
    26. Cho, Won-Young & Ahn, Byong-Hun, 2010. "Versioning of information goods under the threat of piracy," Information Economics and Policy, Elsevier, vol. 22(4), pages 332-340, December.
    27. Atanu Lahiri & Debabrata Dey, 2013. "Effects of Piracy on Quality of Information Goods," Management Science, INFORMS, vol. 59(1), pages 245-264, June.
    28. K. Sridhar Moorthy, 1984. "Market Segmentation, Self-Selection, and Product Line Design," Marketing Science, INFORMS, vol. 3(4), pages 288-307.
    29. Danaher, Brett & Smith, Michael D., 2014. "Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 1-8.
    30. Erik Brynjolfsson & Xiaoquan (Michael) Zhang, 2007. "Innovation Incentives for Information Goods," NBER Chapters, in: Innovation Policy and the Economy, Volume 7, pages 99-123, National Bureau of Economic Research, Inc.
    31. Karthik Kannan & Mohammad S. Rahman & Mohit Tawarmalani, 2016. "Economic and Policy Implications of Restricted Patch Distribution," Management Science, INFORMS, vol. 62(11), pages 3161-3182, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Milan Miric & Lars Bo Jeppesen, 2020. "Does piracy lead to product abandonment or stimulate new product development?: Evidence from mobile platform‐based developer firms," Strategic Management Journal, Wiley Blackwell, vol. 41(12), pages 2155-2184, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tarun Jain & Jishnu Hazra & T. C. Edwin Cheng, 2020. "Illegal Content Monitoring on Social Platforms," Production and Operations Management, Production and Operations Management Society, vol. 29(8), pages 1837-1857, August.
    2. Nie, Jiajia & Zhong, Ling & Li, Gendao & Cao, Kuo, 2022. "Piracy as an entry deterrence strategy in software market," European Journal of Operational Research, Elsevier, vol. 298(2), pages 560-572.
    3. Can Sun & Yonghua Ji & Xianjun Geng, 2023. "Which Enemy to Dance with? A New Role of Software Piracy in Influencing Antipiracy Strategies," Information Systems Research, INFORMS, vol. 34(4), pages 1711-1727, December.
    4. Dan Wu & Guofang Nan & Minqiang Li, 2020. "Optimal Piracy Control: Should a Firm Implement Digital Rights Management?," Information Systems Frontiers, Springer, vol. 22(4), pages 947-960, August.
    5. Peng, Shuxia & Li, Bo & Wu, Shuang, 2023. "Presence of piracy and legal protection: Decisions in the digital goods market under different contracts," European Journal of Operational Research, Elsevier, vol. 309(2), pages 578-596.
    6. Luis Aguiar & Jörg Claussen & Christian Peukert, 2018. "Catch Me If You Can: Effectiveness and Consequences of Online Copyright Enforcement," Information Systems Research, INFORMS, vol. 29(3), pages 656-678, September.
    7. Miguel Godinho de Matos & Pedro Ferreira & Michael D. Smith, 2018. "The Effect of Subscription Video-on-Demand on Piracy: Evidence from a Household-Level Randomized Experiment," Management Science, INFORMS, vol. 64(12), pages 5610-5630, December.
    8. Matthew J. Hashim & Karthik N. Kannan & Sandra Maximiano, 2017. "Information Feedback, Targeting, and Coordination: An Experimental Study," Information Systems Research, INFORMS, vol. 28(2), pages 289-308, June.
    9. Byung Cho Kim & So Eun Park & Detmar W. Straub, 2022. "Pay-What-You-Want Pricing in the Digital Product Marketplace: A Feasible Alternative to Piracy Prevention?," Information Systems Research, INFORMS, vol. 33(3), pages 784-793, September.
    10. Atanu Lahiri & Debabrata Dey, 2013. "Effects of Piracy on Quality of Information Goods," Management Science, INFORMS, vol. 59(1), pages 245-264, June.
    11. C. Bellégo & R. De Nijs, 2015. "The redistributive effect of online piracy on the box office performance of American movies in foreign markets," Documents de Travail de l'Insee - INSEE Working Papers g2015-17, Institut National de la Statistique et des Etudes Economiques.
    12. Burmester, Alexa B. & Eggers, Felix & Clement, Michel & Prostka, Tim, 2016. "Accepting or fighting unlicensed usage: Can firms reduce unlicensed usage by optimizing their timing and pricing strategies?," International Journal of Research in Marketing, Elsevier, vol. 33(2), pages 343-356.
    13. Bradley, Wendy A. & Kolev, Julian, 2023. "How does digital piracy affect innovation? Evidence from software firms," Research Policy, Elsevier, vol. 52(3).
    14. Brett Danaher & Michael D. Smith & Rahul Telang, 2014. "Piracy and Copyright Enforcement Mechanisms," Innovation Policy and the Economy, University of Chicago Press, vol. 14(1), pages 25-61.
    15. Karthik Kannan & Mohammad S. Rahman & Mohit Tawarmalani, 2016. "Economic and Policy Implications of Restricted Patch Distribution," Management Science, INFORMS, vol. 62(11), pages 3161-3182, November.
    16. Herings, P. Jean-Jacques & Peeters, Ronald & Yang, Michael S., 2018. "Piracy on the Internet: Accommodate it or fight it? A dynamic approach," European Journal of Operational Research, Elsevier, vol. 266(1), pages 328-339.
    17. Tyrowicz, Joanna & Krawczyk, Michal & Hardy, Wojciech, 2020. "Friends or foes? A meta-analysis of the relationship between “online piracy” and the sales of cultural goods," Information Economics and Policy, Elsevier, vol. 53(C).
    18. Wojciech Hardy & Michal Krawczyk & Joanna Tyrowicz, 2015. "Friends or foes? A meta-analysis of the link between "online piracy" and sales of cultural goods," Working Papers 2015-23, Faculty of Economic Sciences, University of Warsaw.
    19. Martin Eisend, 2019. "Explaining Digital Piracy: A Meta-Analysis," Information Systems Research, INFORMS, vol. 30(2), pages 636-664, June.
    20. Huang, Yeu-Shiang & Huang, Wei-Jeh & Fang, Chih-Chiang, 2018. "Coordination for distribution of motion pictures in the context of piracy," Journal of Business Research, Elsevier, vol. 85(C), pages 209-225.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:65:y:2019:i:3:p:1173-1190. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.