Originator's costs:

c_{o}=c_{c}
+ c_{ct} + c_{m} + c_{r} (1)

where

c_{c}
is the cost of creation, for example, payments to the author;

c_{ct}
is the cost of chunking and tagging, or otherwise preparing the information for
publication;

c_{m}
is the cost of marketing, including promotional expenses, distribution costs,
and costs of billing and collection; and

c_{r}
is the cost of copying or reproduction.

Pirate's costs:

c_{p}=c_{a}
+ c_{t} + c_{m} + c_{r} + c_{ll} (2)

where

c_{a}
is the cost of acquisition, for example, finding and downloading the material a
pirate intends to resell;

c_{t}
is the cost of transformation;

c_{m}
is the cost of marketing;

c_{r}
is the cost of copying; and

c_{ll}
is the pirate's cost of legal liability.

A free-ride problem exists only if the pirate's costs are less than the originator's costs, in other words if

c_{c}
c_{ct}>c_{a} c_{t} c_{ll} (3)

Most assume that

c_{c}
+ c_{ct} >> c_{a} c_{t}_{ }(4)

and
therefore that the value of c_{ll} must be increased to maintain the
current level of free-riding risk.