DURABILITY CHOICE AND THE PIRACY FOR PROFIT OF GOODS

We explore the impact of durable goods piracy in a simple two‐period durability choice setting where an originator faces a future for‐profit pirate that clones or duplicates copies of the durable good. We find that a social planner, as well as a monopoly originator, may well engage in a sort of ‘reversed planned obsolescence’. In other words, they manufacture a product that is more durable than the first‐best cost‐minimizing level, if they cannot directly control the pirate. We show this occurs even in rental or committed sales settings, indicating Swan's market independence result does not hold here.