Originator's costs:

co=cc + cct + cm + cr                 (1)


cc is the cost of creation, for example, payments to the author;

cct is the cost of chunking and tagging, or otherwise preparing the information for publication;

cm is the cost of marketing, including promotional expenses, distribution costs, and costs of billing and collection; and

cr is the cost of copying or reproduction.

Pirate's costs:

cp=ca + ct + cm + cr + cll           (2)


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

ct is the cost of transformation;

cm is the cost of marketing;

cr is the cost of copying; and

cll 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

cc cct>ca ct cll                            (3)

Most assume that

cc + cct >> ca ct                                    (4)

and therefore that the value of cll must be increased to maintain the current level of free-riding risk.