Prior literature on piracy routinely assumes that a single entity (i.e., "the manufacturer") sells to consumers directly. However, such an assumption do not hold in many commonly found instances where information goods are actually sold though major retailers. Recognizing this discrepancy, we take a closer look into the supply chain of the legal channel. Specifically, we develop an economic model to describe a market where the manufacturer first sells to a retailer at a wholesale price, and the retailer then resells to the consumers. In such a setup, the legal channel has two menaces to deal with: the internal issue of channel coordination and the external issue of piracy. Our interest is on the interaction between these two issues.
Working paper on SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2426577
Poster number: 20