Copyright Infringement, Product Quality and Producer's Profit

This paper uses a strategic entry-deterrence framework to study the relationship between copying cost, and a monopolists profit and product quality. The potential entrant is a fake-producer producing and selling identical copies of the monopolists product. The monopolists subgame perfect equilibrium quality and profit is either unaffected or positively affected by changes in the copying cost. Tariffs on copying devices may be an effective copyright right protection instrument. Though an increase in tariff increases the product quality and monopolists profit, its welfare effects are ambiguous.