0 Movie Piracy and Sales Displacement in Two Samples of Chinese Consumers

Intellectual property piracy is widely believed, by authorities in both U.S. industry and government, to be rampant in China. Because we lack evidence on the rate at which unpaid consumption displaces paid consumption, we know little about the size of the effect of pirate consumption on the volume of paid consumption. We provide direct evidence on both the volume of unpaid consumption and the rate of sales displacement for movies in China using two surveys administered in late 2008 and mid-2009. First, using a survey of Chinese college students ’ movie consumption and an empirical approach parallel to a similar recent study of U.S. college students, we find that three quarters of movie consumption is unpaid and that each instance of unpaid consumption displaces 0.14 paid consumption instances. Second, a survey of online Chinese consumers reveals similar patterns of paid and unpaid movie consumption but a displacement rate of roughly zero. We speculate on the small displacement rate finding relative to most of the piracy literature. We thank the Mack Center at Wharton for financial support. Jie Bai thanks Penn Lauder CIBER for a PhD dissertation grant. We are grateful to Yang Yao and Lixing Li, professors at Peking University, for letting us administer surveys to their students and to Ben Zou for survey administration. All errors are own own.