Novel online file sharing technologies have created new market dynamics for the online distribution of digital goods. But the new potential benefits for consumers are juxtaposed against challenges and opportunities for sellers of such goods. Here we investigate one type of digital experience good, music, whose markets include the presence of piracy options. We present five different pricing models running from a base case of a traditional brick and mortar retailer not facing a piracy option to an online retailer offering per unit and subscription pricing but facing piracy alternatives. In addition, simulation results are presented as a vehicle to develop insights related to the model implications on revenue-maximization and piracy conditions.
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Bhattacharjee et al. (2003) studied this question.