Does Copyright Enforcement Encourage Piracy?
2010, Journal of Industrial Economics
Rick Harbaugh, Rahul Khemka
More intensive copyright enforcement reduces piracy, raises prices, and lowers consumer surplus. We show that these results do not hold regarding the extent rather than intensity of enforcement. When enforcement is targeted at high-value buyers such as corporate and government users, the copyright holder charges super-monopoly prices, thereby encouraging low-value buyers to switch to inferior pirated copies. Extending enforcement down the demand curve broadens the copyright holder’s captive market, reduces prices toward the monopoly level, and increases sales of legitimate copies. Since more extensive enforcement increases both profits and consumer surplus over some range, the standard tradeoff between the incentive to generate intellectual property and the welfare cost of monopoly power is avoided. Technologies such as digital rights management which allow for more extensive copyright enforcement can sometimes benefit consumers even apart from their effects on the incentive to generate intellectual property.
Harbaugh, Rick and Rahul Khemka (2010), "Does Copyright Enforcement Encourage Piracy?," Journal of Industrial Economics, Vol. 58, pp. 306-323.