Working Paper: NBER ID: w12010
Authors: Rafael Rob; Joel Waldfogel
Abstract: New information technology has reduced marginal production and distribution costs of information goods to negligible levels and promises to revolutionize many industries. Unpaid copies of digital products can be as good as paid first-generation copies, and their availability can undermine the ability of sellers to cover first-copy costs. As a result, unpaid distribution has emerged as a major issue facing the music and movie industries in the past few years. Using survey data on movie consumption by about 500 University of Pennsylvania college students, we ask whether unpaid consumption of movies displaces paid consumption. Employing a variety of cross-sectional and longitudinal empirical approaches, we find large and statistically significant evidence of displacement. In what we view as the most appropriate empirical specifications, we find that unpaid first consumption reduces paid consumption by about 1 unit. Unpaid second consumption has a smaller effect, about 0.20 units. These estimates indicate that unpaid consumption, which makes up 5.2 percent of movie viewing in our sample, reduced paid consumption in our sample by 3.5 percent.
Keywords: digital piracy; movie consumption; paid consumption; unpaid consumption
JEL Codes: L8; K2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unpaid first consumption (D19) | paid consumption (D12) |
| unpaid second consumption (D19) | paid consumption (D12) |
| unpaid consumption (D12) | paid consumption (D12) |