Why Software Piracy Rates Differ – A Theoretical Analysis
AbstractThe pervasiveness of the illegal copying of software is a worldwide phenomenon. However, the level of piracy across various markets as well as across various countries varies a great deal. In this paper, we develop a theoretical model to explain this feature. In this model, the software firm undertakes costly deterrence activity in the form of R&D to stop piracy. In our model existence (or non-existence) of piracy comes out endogenously. We show that piracy survives in the market when the income gap is high among the potential software users, enforcement policy against the pirate(s) is less strict (i.e. cost of piracy is not too high), and when the pirate(s) produces a software copy that is moderately reliable.
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Bibliographic InfoPaper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0515.
Length: 23 pages
Date of creation: Dec 2005
Date of revision:
Software piracy; Copyright Violations; R&D; Raising rival’s Cost; Deterrence; Product reliability; Income gap;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
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- Francisco Martínez-Sánchez & Javier M. López Cuñat, 2011. "Anti-piracy policy and quality differential in markets for information goods," Working Papers. Serie AD 2011-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Nicolas Dias Gomes & Pedro André Cerqueira & Luís Alçada Almeida, 2014. "Software Piracy: A Critical Survey of the Theoretical and Empirical Literature," GEMF Working Papers 2014-05, GEMF - Faculdade de Economia, Universidade de Coimbra.
- Insaf Bekir & Sana El Harbi & Gilles Grolleau, 2012. "The strategy of raising counterfeiters’ costs in luxury markets," European Journal of Law and Economics, Springer, vol. 33(3), pages 645-661, June.
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