On the sufficiency of regulatory enforcement in combating piracy

The literature on piracy has questioned the role of regulatory enforcement in the form of monitoring in deterring piracy. This article shows that for a wide range of penalty levels the equilibrium monitoring rate is such that it is optimal for the copyright holder to prevent piracy by expanding his output beyond the monopoly output level rather than producing the monopoly output level and investing in an anticopying technology. This result holds even when the monitoring cost is “sufficiently” high relative to the cost of investing in anti-copying technology.