Abstract: Digital products can be copied almost at no cost and are subject
to non-commercial copying by final consumers. Because the copy of a
copy typically does not deteriorate in quality, copies can become available
on a large scale basis – this can be illustrated by the surge of file-sharing
networks. In this paper we provide a critical overview of the theoretical
literature that addresses the economic consequences of end-user copying.
We analyze basic models of piracy, models with indirect appropriation,
models with network effects, and models with asymmetric information.
We discuss the applicability of the different modeling strategies to a
number of industries such as software, video and computer games, music,
and movies.