The Intertemporal Consequences of Unauthorized Reproduction of Intellectual Property

Abstract

In an intertemporal framework, the harm to firms from unauthorized reproduction of their products may be significantly greater than that predicted by most static models; copying by some consumers reduces the appropriable surplus from all consumers—including those consumers lacking any propensity to copy. Somewhat paradoxically, however, the commitment value of copies may also imply that profits are higher with copying than without copying. It is therefore suggested that firms may prefer differential copyright enforcement and that the commitment value of copies may offer a strategic explanation for free giveaways of abridged versions of intellectual property and vertical product differentiation more generally.