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The Economics of IPR Protection Policies

The Review of Network Economics

Vol. 5, Issue 3 - September 2006, pp 299 - 319

  Ricard Gil
Department of Economics, UC Santa Cruz
E-mail: [email protected]

  In this paper, I model competition between legal and pirate products. In this framework, the government affects competition through police spending and taxes on the legal products. Therefore, the government can choose the optimal combination of spending and taxes that fit better its goals. I show that governments focusing on eradicating piracy will use lower level of taxes and police spending than governments focused on maximizing consumption, consumer surplus, and welfare or government size. This result highlights the importance of demand side policies in the fight against piracy and challenges the traditional solo approach of supply side policies.

Keywords: Piracy, intellectual property, competition, tax policy

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