School of Economics and Finance

No. 463: Pricing Information Goods in the Presence of Copying

Paul Belleflamme , Queen Mary, University of London

September 1, 2002

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The effects of (private, small-scale) copying on the pricing behavior of producers of information goods are studied within a unified model à la Mussa-Rosen (1978). When the copying technology involves a marginal cost and no fixed cost, producers act independently. In this simple framework, we highlight the trade-off between ex ante and ex post efficiency considerations (how to provide the right incentives to create whilst limiting monopoly distortions?). When the copying technology involves a fixed cost and no marginal cost, pricing decisions are interdependent. We investigate the strategic pricing game by focussing on some significant symmetric Nash equilibria.

J.E.L classification codes: L13, L82, L86, K11, O34

Keywords:Information goods, Piracy, Copyright, Pricing