The Limits of Indirect Appropriability in Markets for Copiable Goods

An extensive literature has developed that argues that in many settings the social welfare costs of copying or piracy are limited because of the presence of indirect appropriability. Indirect appropriability is the idea that original good producers can appropriate some of the value derived by the consumers of copies because of the return that buyers of original units receive from allowing copies to be made. In this paper we discuss the limitations of indirect appropriability, where the two we focus on are the "flooding" of the copy market and substitutability between new units and copies. We also discuss the ramifications of our analysis for real world markets.

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