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.