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Publisher's Announcements and Piracy-Monitoring Devices in Software Adoption

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Author Info

  • Eric Darmon

    (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie)

  • Alexandra Rufini

    ()
    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis [UNS])

  • Dominique Torre

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis [UNS])

Abstract

In this paper, we investigate the distribution strategy of a software publisher. The user adoption context is characterized by uncertainty about quality (experience good) and heterogeneous piracy costs. Users can purchase or get unauthorized/illegal copies (digital piracy) of the software during two periods (or not adopt at all). Between these two periods, users can acquire information through word-of-mouth. To maximize profit, the publisher needs to decide about price, quality and level of monitoring of piracy. We show that the software publisher can profit from accommodation a certain level of piracy of the product. We add to the literature by explicitly considering the opportunity for the publisher to cheat about future price and monitoring levels (misleading announcements). This strategy that is falsely permissive towards piracy, can sometimes appear more profitable. However, when the degree of sophistication of user expectations about the publisher's strategy increases, only a strategy that is permissive (with respect to piracy) with non misleading announcements remains robust.

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File URL: http://halshs.archives-ouvertes.fr/docs/00/92/97/92/PDF/piracy-AES_DEF.pdf
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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00929792.

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Date of creation: 16 Jan 2014
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Handle: RePEc:hal:wpaper:halshs-00929792

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Related research

Keywords: software distribution strategy ; piracy ; experience good ; misleading announcements;

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References

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  1. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
  2. Ram D. Gopal & G. Lawrence Sanders, 2006. "Do Artists Benefit from Online Music Sharing?," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1503-1534, May.
  3. Michael Stolpe, 2000. "Protection Against Software Piracy: A Study Of Technology Adoption For The Enforcement Of Intellectual Property Rights," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 9(1), pages 25-52.
  4. Eric Darmon & Alexandra Rufini & Dominique Torre, 2009. "Back to software "profitable piracy": the role of information diffusion," Economics Bulletin, AccessEcon, vol. 29(2), pages 543-553.
  5. Haruvy, Ernan & Prasad, Ashutosh, 2005. "Freeware as a competitive deterrent," Information Economics and Policy, Elsevier, vol. 17(4), pages 513-534, October.
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