Abstract

We present a perfect Nash equilibrium in which the creator of a work, motivated by economic considerations, selectively enforces her own copyright. In fact, the creator may not only permit, but may strategically promote infringement of the copyright, thereby participating indirectly in predatory pricing, and so raising barriers to entry. Our model is highly applicable to the software industry, where relatively high entry costs and the relatively low cost of copyright infringement make this phenomenon likely. We further show the conditions under which exogenous intervention, through intensive enforcement of copyrights, increases social welfare. Finally, we explore some potential strategies for such legal intervention.