Sensitivity To Tax Revenues and Optimal Anti-piracy Policy Instruments
Abstract: We examine the effects of a governmentâ€™s sensitivity to its tax revenues, earned from the software industry, on its anti-piracy policies that consists of monitoring and penalizing a commercial software pirate. We consider a strategic entry-deterrence framework where the original producer chooses a pricing strategy that either allows or deters the pirateâ€™s entry. Sensitivity to tax revenues is a necessary but not a sufficient condition to prevent piracy. Welfare maximization may or may not result in monitoring as the socially optimal outcome. If monitoring is socially optimal then the pirateâ€™s entry is deterred. The equilibrium entry-deterring price may be less than the equilibrium monopoly price. Only in the extreme case the monopoly outcome is restored.
|Date of creation:||11 Aug 2004|
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