IDEAS home Printed from https://ideas.repec.org/a/wly/iecrev/v64y2023i2p543-575.html
   My bibliography  Save this article

Settling Lawsuits With Pirates

Author

Listed:
  • Xinyu Hua
  • Kathryn E. Spier

Abstract

A firm licenses a product to overlapping generations of heterogeneous consumers. Consumers may purchase the product, pirate/steal it, or forego it. Higher consumer types enjoy higher gross benefits and are caught stealing at a higher rate. The firm may commit to an out‐of‐court settlement policy that is “soft” on pirates, so high types purchase the product and low types steal it until caught. Settlement contracts, which include both cash payments and licenses for future product use, facilitate price discrimination. Settlement may either create social value by expanding the market or destroy value by limiting market access and possibly deterring more efficient entrants.

Suggested Citation

  • Xinyu Hua & Kathryn E. Spier, 2023. "Settling Lawsuits With Pirates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 543-575, May.
    • Handle: RePEc:wly:iecrev:v:64:y:2023:i:2:p:543-575
    DOI: 10.1111/iere.12608
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/iere.12608
    Download Restriction: no
    File URL: https://libkey.io/10.1111/iere.12608?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
    ---><---

    Other versions of 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. Paul Belleflamme & Pierre M. Picard, 2007. "Piracy and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 351-383, June.
    4. Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 155-166, June.
    5. Goldfarb, Avi & Greenstein, Shane M. & Tucker, Catherine E. (ed.), 2015. "Economic Analysis of the Digital Economy," National Bureau of Economic Research Books, University of Chicago Press, number 9780226206981, September.
    6. Sergei Guriev & Mikhail Klimenko, 2015. "Duration and Term Structure of Trade Agreements," Economic Journal, Royal Economic Society, vol. 125(589), pages 1818-1849, December.
    7. Shapiro, Carl, 2003. "Antitrust Limits to Patent Settlements," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 391-411, Summer.
    8. Marco Battaglini & Bård Harstad, 2016. "Participation and Duration of Environmental Agreements," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 160-204.
    9. Paul Belleflamme & Martin Peitz, 2010. "Digital Piracy: Theory," CESifo Working Paper Series 3222, CESifo.
    10. Kim C. Border & Joel Sobel, 1987. "Samurai Accountant: A Theory of Auditing and Plunder," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(4), pages 525-540.
    11. Johnson, William R, 1985. "The Economics of Copying," Journal of Political Economy, University of Chicago Press, vol. 93(1), pages 158-174, February.
    12. Bard Harstad, 2012. "Climate Contracts: A Game of Emissions, Investments, Negotiations, and Renegotiations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(4), pages 1527-1557.
    13. Hong Luo & Julie Holland Mortimer, 2018. "Infringing Use as a Path to Legal Consumption: Evidence from a Field Experiment," Boston College Working Papers in Economics 971, Boston College Department of Economics.
    14. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    15. Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, vol. 81(5), pages 1137-1145, December.
    16. Sergei Guriev & Dmitriy Kvasov, 2005. "Contracting on Time," American Economic Review, American Economic Association, vol. 95(5), pages 1369-1385, December.
    17. Susan Athey & Scott Stern, 2015. "The Nature and Incidence of Software Piracy: Evidence from Windows," NBER Chapters, in: Economic Analysis of the Digital Economy, pages 443-477, National Bureau of Economic Research, Inc.
    18. Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-246, April.
    19. Bakos, Yannis & Brynjolfsson, Erik & Lichtman, Douglas, 1999. "Shared Information Goods," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 117-155, April.
    20. Peitz, Martin & Waelbroeck, Patrick, 2006. "Piracy of digital products: A critical review of the theoretical literature," Information Economics and Policy, Elsevier, vol. 18(4), pages 449-476, November.
    21. Jay Pil Choi, 2010. "Patent Pools And Cross-Licensing In The Shadow Of Patent Litigation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 441-460, May.
    22. John Simpson & Abraham L. Wickelgren, 2007. "Naked Exclusion, Efficient Breach, and Downstream Competition," American Economic Review, American Economic Association, vol. 97(4), pages 1305-1320, September.
    23. repec:hal:spmain:info:hdl:2441/4et5cqo2b89lursqp7n50mt26c is not listed on IDEAS
    24. Hong Luo & Julie Holland Mortimer, 2017. "Copyright Enforcement: Evidence from Two Field Experiments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 499-528, June.
    25. Oz Shy & Jacques‐Françlois Thisse, 1999. "A Strategic Approach to Software Protection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 163-190, June.
    26. Peitz, Martin & Waelbroeck, Patrick, 2006. "Why the music industry may gain from free downloading -- The role of sampling," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 907-913, September.
    27. Duchene, Anne & Waelbroeck, Patrick, 2006. "The legal and technological battle in the music industry: Information-push versus information-pull technologies," International Review of Law and Economics, Elsevier, vol. 26(4), pages 565-580, December.
    28. Liebowitz, S J, 1985. "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 945-957, October.
    29. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
    30. Casadesus-Masanell Ramón & Ghemawat Pankaj, 2006. "Dynamic Mixed Duopoly. A Model Motivated by Linux versus Windows," Working Papers 201048, Fundacion BBVA / BBVA Foundation.
    31. Choi, Jay Pil, 1998. "Patent Litigation as an Information-Transmission Mechanism," American Economic Review, American Economic Association, vol. 88(5), pages 1249-1263, December.
    32. Besen, Stanley M & Kirby, Sheila Nataraj, 1989. "Private Copying, Appropriability, and Optimal Copying Royalties," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 255-280, October.
    33. Enrique Ide & Juan-Pablo Montero & Nicolás Figueroa, 2016. "Discounts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 106(7), pages 1849-1877, July.
    34. Michael J. Meurer, 1989. "The Settlement of Patent Litigation," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 77-91, Spring.
    35. Ramon Casadesus-Masanell & Pankaj Ghemawat, 2006. "Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows," Management Science, INFORMS, vol. 52(7), pages 1072-1084, July.
    36. James E. Bessen & Michael J. Meurer, 2006. "Patent Litigation with Endogenous Disputes," American Economic Review, American Economic Association, vol. 96(2), pages 77-81, May.
    37. Claude Crampes & Corinne Langinier, 2002. "Litigation and Settlement in Patent Infringement Cases," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 258-274, Summer.
    38. Green, Richard & Le Coq, Chloé, 2010. "The length of contracts and collusion," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 21-29, January.
    39. Kathryn E. Spier & Michael D. Whinston, 1995. "On the Efficiency of Privately Stipulated Damages for Breach of Contract: Entry Barriers, Reliance, and Renegotiation," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 180-202, Summer.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. 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.
    3. Tsai, Ming-Fang & Chiou, Jiunn-Rong & Lin, Chun-Hung A., 2012. "A model of counterfeiting: A duopoly approach," Japan and the World Economy, Elsevier, vol. 24(4), pages 283-291.
    4. 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.
    5. Paul Belleflamme & Pierre M. Picard, 2007. "Piracy and Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 351-383, June.
    6. Yeh-ning Chen & Ivan Png, 2003. "Information Goods Pricing and Copyright Enforcement: Welfare Analysis," Information Systems Research, INFORMS, vol. 14(1), pages 107-123, March.
    7. Gürtler, Oliver, 2006. "Software Piracy in the Video Game Market," Bonn Econ Discussion Papers 20/2006, University of Bonn, Bonn Graduate School of Economics (BGSE).
    8. Jean-Jacques Herings, P. & Peeters, Ronald & Yang, Michael S., 2010. "Competition against peer-to-peer networks," Information Economics and Policy, Elsevier, vol. 22(4), pages 315-331, December.
    9. Baojun Jiang & Lin Tian, 2018. "Collaborative Consumption: Strategic and Economic Implications of Product Sharing," Management Science, INFORMS, vol. 64(3), pages 1171-1188, March.
    10. Bradley, Wendy A. & Kolev, Julian, 2023. "How does digital piracy affect innovation? Evidence from software firms," Research Policy, Elsevier, vol. 52(3).
    11. Bae Sang Hoo & Yoo Kyeongwon, 2021. "Is Imitation Bad for the Production of Creative Works?," Review of Network Economics, De Gruyter, vol. 19(2), pages 115-144, January.
    12. Peitz, Martin & Waelbroeck, Patrick, 2006. "Piracy of digital products: A critical review of the theoretical literature," Information Economics and Policy, Elsevier, vol. 18(4), pages 449-476, November.
    13. Martin Peitz & Patrick Waelbroeck, 2005. "An Economist's Guide to Digital Music," CESifo Economic Studies, CESifo Group, vol. 51(2-3), pages 359-428.
    14. Liang Guo & Xiangyi Meng, 2015. "Digital Content Provision and Optimal Copyright Protection," Management Science, INFORMS, vol. 61(5), pages 1183-1196, May.
    15. Rasch, Alexander & Wenzel, Tobias, 2013. "Piracy in a two-sided software market," Journal of Economic Behavior & Organization, Elsevier, vol. 88(C), pages 78-89.
    16. Gürtler, Oliver, 2005. "On Strategic Enabling of Product Piracy in the Market for Video Games," Bonn Econ Discussion Papers 36/2005, University of Bonn, Bonn Graduate School of Economics (BGSE).
    17. Minniti, Antonio & Vergari, Cecilia, 2010. "Turning Piracy into Profits: a Theoretical Investigation," Information Economics and Policy, Elsevier, vol. 22(4), pages 379-390, December.
    18. Ming-Fang Tsai & Jiunn-Rong Chiou, 2012. "Counterfeiting, enforcement and social welfare," Journal of Economics, Springer, vol. 107(1), pages 1-21, September.
    19. Sanjay Jain, 2008. "Digital Piracy: A Competitive Analysis," Marketing Science, INFORMS, vol. 27(4), pages 610-626, 07-08.
    20. Yoon, Kiho, 2002. "The optimal level of copyright protection," Information Economics and Policy, Elsevier, vol. 14(3), pages 327-348, September.

    More about this item

    Statistics

    Access and download statistics

    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:wly:iecrev:v:64:y:2023:i:2:p:543-575. 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: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/deupaus.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.