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Controlling digital piracy has remained a top priority for manufacturers of information goods, as well as for many governments around the world. Among the many forms taken by digital piracy, we focus on an increasingly common one--namely, online piracy--that is facilitated by torrent sites and cyberlockers who bring together consumers of pirated content and its suppliers. Motivated by recent empirical literature that makes a clear distinction between antipiracy efforts that restrict supply of pirated goods (supplyside enforcement) and ones that penalize illegal consumption (demand-side enforcement), we develop a simple economic model and discover some fundamental differences between these two types in terms of their impacts on innovation and welfare. All in all, supply-side enforcement turns out to be the 'longer arm'--it has a more desirable economic impact in the long run. Our results have clear implications for manufacturers, consumers, and policy makers. History: Accepted by Chris Forman, information systems. Supplemental Material: The online supplement is available at https://doi.org/10.1287/mnsc.2017.2984. Keywords: online piracy * supply-side enforcement * demand-side enforcement * innovation * welfare, 1. Introduction Piracy of digital goods--ranging from movies, music, and TV shows to video games and computer software--has become an important issue facing their manufacturers and, at times, consumers and [...]

It is commonly believed that piracy of information goods leads to lower profits, which translate to lower incentives to invest in innovation and eventually to lower-quality products. Manufacturers, policy makers, and researchers all claim that inadequate piracy enforcement efforts translate to lower investments in product development. However, we find many practical examples that contradict this claim. Therefore, to examine this claim more carefully, we develop a rigorous economic model of the manufacturer's quality decision problem in the presence of piracy. We consider a monopolist who does not have any marginal costs but has a product development cost quadratic in the quality level produced. The monopolist faces a consumer market heterogeneous in its preference for quality and offers a quality level that maximizes its profit. We also allow for the possibility that the manufacturer may use versioning to counter piracy. We unexpectedly find that in certain situations, lower piracy enforcement increases the monopolist's incentive to invest in quality. We explain the reasons and welfare implications of our findings. Key words: piracy; quality; pricing; information good; versioning History: Received June 21, 2011; accepted April 14, 2012, by Lorin Hitt, information systems. Published online in Articles in Advance October 8, 2012., 1. Introduction Piracy nowadays is one of the most important issues facing providers of information goods. According to a report by the U.S. Government Accountability Office (GAO 2010, p. 9), [...]

The literature on business process design has focused on issues such as bottlenecks, workflow configuration (series versus parallel), replacing an existing workflow with a shorter one, etc. One important issue [...]