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Why Software Piracy Rates Differ – A Theoretical Analysis

  • Sougata Poddar


    (Department of Economics, National University of Singapore)

The 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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Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0515.

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Length: 23 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:nus:nusewp:wp0515
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