Theory of Deterrence and Individual Behavior. Can Lawsuits Control File Sharing on the Internet?

The music and movie industries have recently added individual consumers as the target of the file sharing lawsuits. It is often questioned why the industries use substantial resources to fight in the courtrooms instead of making better and more affordable products. In this article, we first analyze the reasons of the industry behavior suggesting that the court strategy may be in fact more effective, at least in the short term, than it should be based on pure economic calculations. However, the empirical evidence seems to imply that lawsuits fail to send a strong signal to individuals about the society's supposedly negative attitude towards file sharing. General deterrence from the threat of being sued does not help in the end either because people are risk seeking in the face of making a decision between a certain and probable loss. In conclusion, we argue that the court strategy cannot be used to establish any social norm with a long lasting effect on individual behavior as long as the peer pressure works towards the opposite direction.