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What is the True Loss Due to Piracy?: Evidence from Microsoft Office in Hong Kong

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  • Leung, Tin Cheuk

Abstract

Software piracy remains rampant despite the successful measures the Hong Kong government has taken to eradicate street piracy. This is because most people prefer substituting a counterfeit copy of a software CD (street piracy) with an illegal download of the software (Internet piracy). To support this claim, I construct a unique data set from 281 college students in Hong Kong to demonstrate two things. First, I estimate a random-coefficient discrete choice demand system for Microsoft Office from legal and different illegal sources. Estimates obtained from a Bayesian approach, with a mixture of normal priors, indicate a strong substitution pattern between street piracy and Internet piracy. Second, I conduct counterfactuals in which street piracy is absent. Results are twofold. First, most students would switch to Internet piracy. Second, the government, by assuming that each pirated copy represents a lost sale, may over-estimate the gain from eradicating piracy by up to nine times.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32597.

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Date of creation: Jul 2011
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Handle: RePEc:pra:mprapa:32597

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Keywords: software piracy; bayesian; conjoint analysis;

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Cited by:
  1. Leung, Tin Cheuk, 2012. "Music Piracy: Bad for Record Sales but Good for the iPod?," MPRA Paper 45772, University Library of Munich, Germany.
  2. Leung, Tin Cheuk & Ng, Travis & Ho, Chun-Yu & Chao, Hong, 2013. "To Root or Not to Root? The Economics of Jailbreak," MPRA Paper 47409, University Library of Munich, Germany.

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