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This paper analyzes the choice between quality improvements and copyright litigation by a proprietary seller who faces a competitive threat from a content-sharing platform. The platform operates like a “public good” with contributors who share content and free-riders who only consume content while adding to congestion on the platform. When the proprietor can identify contributors in the platform with sufficient accuracy, a litigation strategy that targets contributors exacerbates free-riding behavior in the sharing platform and drives down platform quality. In contrast, investing in quality improvements for the copyrighted good does not affect contribution decisions on the platform, leading to a uniform decrease in the relative payoff for all users on the platform. The model presented in the paper shows that the proprietor finds litigation more profitable than quality improvements if she can target contributors accurately. Welfare analysis of the model shows that the proprietor has too high an incentive to invest in litigation and inefficiently low incentives for quality improvements of the copyrighted good.


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