2772. Optimizing Punitive Damages in Copyright Enforcement: Balancing Deterrence and Market Participation
Invited abstract in session TD-53: New Trends in Game Theory VII, stream Game Theory and Mathematical Economics.
Tuesday, 14:30-16:00Room: Liberty Moot Court
Authors (first author is the speaker)
| 1. | I-Hsuan Hong
|
| Industrial Engineering, National Taiwan University | |
| 2. | Fong-Yu Chen
|
| National Taiwan University | |
| 3. | Wayne Fu
|
| Information and Operations Management, University of Michigan-Dearborn | |
| 4. | Jack C.P. Su
|
| Andersen School of Management, University of New Mexico |
Abstract
The growing emphasis on intellectual property rights necessitates strong legal frameworks and penalties to deter piracy. This study examines the impact of punitive damages in copyright infringement cases, analyzing their effects on studios, legal and illegal platforms through analytical modeling and empirical research. We develop a two-stage Stackelberg game model, where studios set licensing fees, while legal and illegal platforms determine pricing and piracy strategies. Consumers choose between legal consumption, piracy, or abstention based on their perceived utility. Using backward induction, we derive equilibrium decisions and evaluate how punitive damages influence revenue, demand, and pricing.
To validate our model, we conduct an empirical study. Findings show that higher punitive damages reduce piracy by increasing search costs for illegal content, promoting legitimate consumption. However, excessive penalties may have diminishing returns, discouraging overall market participation. These insights help optimize punitive damages, ensuring penalties deter piracy without stifling consumer engagement or driving piracy underground.
Keywords
- Service Operations
- Game Theory
- OR/MS and the Public Sector
Status: accepted
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