The Intertemporal Enforcement Strategies of Copyright Protection : An Analysis of Information Goods in the Presence of File-Sharing Networks

The paper analyzes a copyright owning firm's incentive to enforce its copyright in the presence of file-sharing networks. I devise a two-period model where a copyright owner sells two different versions of a creator's information good, and show that the firm's overall profits are enhanced by a strategy of differential inter-temporal enforcement of the copyright protection, compared to strategies of no enforcement or full enforcement in both periods. If the firm enforces no copyright protection in the first period, the low-valuation consumers may make and consume copies that are imperfect substitutes for the original information good. If there is a significant increase in the willingness-to-pay of some low-valuation consumers after they experience the information good, the firm can extract the increased consumer surplus by enforcing a positive level of copyright protection in the second period. Social welfare, however, is maximized in the case of no enforcement.