Copyright holders of multi-million dollar franchises decry piracy and proclaim it to be a threat to their business. The reality is different. Piracy can spur competition and keep prices lower as a result. Additionally, the amount of piracy isn’t as high as large mega-corporations will have you believe. Meaning that the concerns around piracy are overblown and that piracy is counter intuitively good for the economy.
“When information goods are sold to consumers via a retailer, in certain situations, a moderate level of piracy seems to have a surprisingly positive impact on the profits of the manufacturer and the retailer while, at the same time, enhancing consumer welfare,” wrote Antino Kim, assistant professor of operations and decision technologies at Kelley, and his co-authors.
“Such a win-win-win situation is not only good for the supply chain but is also beneficial for the overall economy.”
While not condoning piracy, Kim and his colleagues were surprised to find that it can actually reduce, or completely eliminate at times, the adverse effect of double marginalization, an economic concept where both manufacturers and retailers in the same supply chain add to the price of a product, passing these markups along to consumers.
