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On the Impact of Piracy on Innovation in the Presence of Technological and Market Uncertainty


  • Dyuti Banerjee
  • Ishita Chatterjee


This paper analyses the effect of piracy on innovation in the presence of R&D competition with technological and market uncertainty. With a single innovating firm facing technological uncertainty, piracy unambiguously retards innovation. However, with R&D competition where firms face market and technological uncertainties, we show that piracy may enhance overall innovation. We also show that if the difference between the probabilities of success of the innovating firms is relatively large then piracy enhances the R&D investment and profit of the less efficient firm.

Suggested Citation

  • Dyuti Banerjee & Ishita Chatterjee, 2009. "On the Impact of Piracy on Innovation in the Presence of Technological and Market Uncertainty," Monash Economics Working Papers 26-09, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2009-26

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    References listed on IDEAS

    1. Sana El Harbi & Gilles Grolleau, 2008. "Profiting from Being Pirated by 'Pirating' the Pirates," Kyklos, Wiley Blackwell, vol. 61(3), pages 385-390, August.
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    More about this item


    Innovation; market uncertainty; R&D race; technological uncertainty;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights


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