Strategies for Providing Digital Culture Goods in the Presence of Consumer Sharing and Content Co-Creation

New forms of implicit consumer collaborations in online communities and social networks influence demand preferences as consumers (1) increasingly exchange information about products and providers (thus reducing information asymmetry) and (2) increasingly participate in the creation of cultural goods themselves by contributing user-generated content (thus complementing and competing with firm offerings). While research findings on these issues vary there is strong evidence from theoretical and empirical research that, overall, piracy hurts producers and that the increased information endowment challenges the profitability of conventional producer strategies that are based on pushing product designs to large segments of consumers while ignoring to service the subtle nuances in consumer demand patterns. We contribute an experimental economics study that finds that consumer-based co-creation increases economic efficiency and that social welfare benefits are robust in the presence of moderate consumer piracy. We also discuss some business implications of our results for content producers