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Variable marginal propensities to pirate and the diffusion of computer software

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  • Waters, James

Abstract

In this paper, we empirically investigate the dynamics of the marginal propensity to pirate for computer software. We introduce a state space formulation that allows us to estimate error structures and parameter significance, in contrast to previous work. For data from 1987-92, we find a rising propensity to pirate as the number of existing pirate copies increases, and higher late piracy incidence than implied by static models. We strengthen prior results on the impact of piracy in the spreadsheet market, finding it to be the only significant internal influence on diffusion. However, when we allow for negative error correlation between legal and pirate acquisitions, we contradict earlier work by finding that, in the word processor market, piracy did not contribute to diffusion and only eroded legal sales.

Suggested Citation

  • Waters, James, 2013. "Variable marginal propensities to pirate and the diffusion of computer software," MPRA Paper 46036, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:46036
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    File URL: https://mpra.ub.uni-muenchen.de/46036/1/MPRA_paper_46036.pdf
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    References listed on IDEAS

    as
    1. David C. Schmittlein & Vijay Mahajan, 1982. "Maximum Likelihood Estimation for an Innovation Diffusion Model of New Product Acceptance," Marketing Science, INFORMS, vol. 1(1), pages 57-78.
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    3. Clark, Todd E. & West, Kenneth D., 2007. "Approximately normal tests for equal predictive accuracy in nested models," Journal of Econometrics, Elsevier, vol. 138(1), pages 291-311, May.
    4. Christophe Van den Bulte & Stefan Stremersch, 2004. "Social Contagion and Income Heterogeneity in New Product Diffusion: A Meta-Analytic Test," Marketing Science, INFORMS, vol. 23(4), pages 530-544, July.
    5. V. Srinivasan & Charlotte H. Mason, 1986. "Technical Note—Nonlinear Least Squares Estimation of New Product Diffusion Models," Marketing Science, INFORMS, vol. 5(2), pages 169-178.
    6. Jain, Dipak C & Rao, Ram C, 1990. "Effect of Price on the Demand for Durables: Modeling, Estimation, and Findings," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 163-170, April.
    7. van den Bulte, C. & Stremersch, S., 2003. "Contagion and heterogeneity in new product diffusion: An emperical test," ERIM Report Series Research in Management ERS-2003-077-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
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    More about this item

    Keywords

    Computers; software; piracy; technology; diffusion;

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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