[GeoffR]

I haven't read the full paper, and I am not an economist, but I think the idea of shadow competition from pirates benefiting both producer and retailer would only apply to a wholesale type situation, where the producer benefits if the retailer lowers their (inefficiently high) price because it means the price to the consumer is lower but the producer still gets their wholesale price, i.e. the retailer is taking a smaller share of the revenue. (Edit: and vice versa where the retailer benefits if a producer reduces their inefficiently high wholesale price to compete with pirates.)

However that wouldn't apply to the ebook market which is all based on commission sales, the producer generally sets the retail price, and if the retailer does discount their price to compete with pirates then the commission arrangement means that the producer loses out too.