Determinants of Violation of Copyright Law: Insights from Surveys and Experiments Anna Maffioletti (Univ. of Torino), Matteo Migheli (Univ. of Eastern Piedmont and Torino) and Giovanni Ramello (Univ. of Eastern Piedmont) IAREP 2008 Roma 3 rd – 6 th September

CD Piracy Recent phenomenon due to:  available technologies  very low marginal cost of copying CDs (Shapiro and Varian, 1999) make CDs almost public goods  perceived (and likely real) low detection probability (Chen and Png, 2003)  very high quality of copies (Bhattacharjee et al., 2003)  proliferation of peer – to – peer communities for file sharing  however, illegal music downloaders buy more music than those who do not use file sharing (Zentner, 2006)

Psychological Perception of Piracy Copiers believe the music companies to be unethical (i.e. too high prices), then copying music CDs is not perceived as immoral (Levin et al., 2004) nor as illegal (Walsh et al., 2003) It is a theft (maybe) but not a crime (Balestrino, 2007): if no social value attached to stigmatising illegal copies, the stigma will not arise.

Socio-Demographic Factors Age: as age increases piracy tendency decreases (Seale et al., 1998 and Chiang and Assane, 2007) Gender:males tend to copy more than females in U.S. university campus (Chiang and Assane, 2007). Kini et al. (2000) highlight males to be less moral than female students in a U.S. campus. Chinese female students have a weaker intention to buy pirated CDs than males (Kwong et al., 2003) Social norms can discourage compliance with law (Schultz, 2006). In particular national culture plays a crucial role (Husted, 2000)

Methodology We use two different approaches:  Contingent valuations (by the mean of a paper questionnaire)  Experiment based on auctioning the “preferred CD” of each auctioneer Then we compare them: the extant literature usually measures the wtp by the mean of questionnaires.

Contingent Valuation Undergraduate students of Italian universities They were asked to write down their wtp for the newest CD of their preferred artist They had two paper sheets: one for an original CD, the second for a copy A questionnaire aimed at collecting socio- demographic data

Experiment Third-price auction for a CD of the preferred participant’s artist Both the highest and the second highest bidders buy the CD at the third price Sealed envelope auction Bidders in the same room: they can see each other Winners publicly announced The winners received a purchasing voucher from the experimenter after paying the third price.

CV vs. Experiment While in the CV the prize for the participants was limited to a participation fee, in the experiment the winners did actually get their preferred CD In the CV participants had not to pay any price: this might not to elicit their wtp correctly The first fact can increase the maximum price in the CV, the second can decrease the bid in the experiment (although the winner’s curse may hold: see Milgrom and Weber, 1982) Therefore we expect:  people to evaluate the pirated (but not the original) CD more in the CV than in the experiment

Sample Description and Methodology A total of 345 students (46% of whom were male) participated in the CV A total of 152 students (65% of whom were male) participated in the experiment All of them are undergraduate students Methodology:  non parametric tests on distributions and differences of means  OLS and probit

Results: WTP Copied CD Table 1. Average wtp in euro for the copied CD (Hotelling test) samplemalefemaleExperimentCV mean p-value0.0016< Experiment Contingent Valuation MaleFemaleMaleFemale mean p-value

Results: WTP Original CD Table 2. Average wtp in euro for the original CD (Hotelling test) samplemalefemaleExperimentCV mean p-value0.055< Experiment Contingent Valuation MaleFemaleMaleFemale mean p-value

Results: OLS over wtp for burned CD

Results: Ordered Probit over Number of Files Illegaly Downloaded from the Internet

Final Remarks About burned CD purchasing our work shows that:  Italian university students are willing to pay less when they have to really pay the CD they like (experiment vs. CV)  Female students are more willing to pay in the CV than males, but this result does not hold in the auction  Individual weekly income does not affect the wtp in the CV, but it does in the auction  Burning time and burning cost display opposite influences in the CV and in the experiment

Final Remarks On download behaviour our work shows that:  Male students are more likely to download illegal music files, than female are  Weekly income increases the probability of downloading illegal music files  Eventually the perception of downloading as criminal and/or unethical decreases the probability of downloading: notice that this is not the case for bids in the auction

Final Remarks Eventually:  we claim that a third-price auction is a correct method to elicit the individual wtp, hence  the significant difference due to the methodology, in our eyes, highlights that a paper-sheet based elicitation of individual wtp does not capture the actual wtp. If it were the case there would be no significant difference between the two price vectors