Private or Public Law Enforcement? The Case of Digital Piracy Policies with Non-Monitored Illegal Behaviors

Abstract

In the case of digital piracy should rights be publicly or privately enforced? The emergence of large-scale anti-piracy laws and the existence of non-monitored illegal channels raise important issues for the design of digital anti-piracy policies. In this paper, we study the impact of these two enforcement settings (public vs. private) in the presence of an illegal non-monitored outside option for users. Taking account of market outcomes, we show that in both cases, the optimal strategies of the legal seller and the monitoring authority leads to rejection of the outside option out while accommodating to the presence of illegal monitored channels. Compared to private enforcement, public enforcement generates higher monitoring levels and lower price levels. Public enforcement also generates greater (legal) welfare. However, we identify potential conflict of interests between the legal seller and the social planner when the efficiency of non monitored networks is low. We provide some insights into the role of supply side anti-piracy policies.