Piracy, Lawsuits, and Competition for Reputation

We investigate how competition for reputation among consumers can impact the effectiveness of firm interventions. In situations where the firm attempts to intervene to change consumer behavior (e.g., advertising, policy guidelines, legal threats), the consumer's response may depend not only on the consumer's own reputation-building considerations but also on those of others. In this study, we model uploaders' decisions to enhance their reputations by uploading pirated content to a digital platform. Uploaders weigh the reputational benefits from uploading versus the costs from penalties associated with copyright lawsuits (firm interventions). Furthermore, competition from other uploaders who also seek to build their reputations impact each uploader's potential gains. Using a novel data set, we find empirical support for our conceptual framework, which suggests copyright lawsuits may deter uploading in the short-run but may, in some cases, lead to more piracy over the long-run. Our conceptual framework proposes that low-reputation uploaders decrease their reputation-building activity in response to lawsuits. However, this decrease may create an opportunity for their high-reputation competition to increase their uploading activity and enhance their reputations. The implication for firms is that when considering consumer interventions to mitigate harmful activity, firms need to account for consumer reputation concerns and plan accordingly