On Software Piracy when Piracy is Costly

Abstract

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 some markets (countries), we observe rampant piracy while in some other markets (countries) piracy is rare. In this paper, we develop a simple economic model to explain both these features when there is one original firm/retailer and one pirate in the market. We find out under what condition piracy will take place. We show that the pirate survives in the market, when cost of piracy is not too high, which in turn depends on the legal environment (e.g. the enforcement policy against the pirate) under which the pirate operates; and the pirate produces a copy that is moderately reliable and moderately differentiated from the original product available in the market. JEL classifications: D23, D43, L13, L86

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Cite this paper

@inproceedings{Poddar2003OnSP, title={On Software Piracy when Piracy is Costly}, author={S. Poddar}, year={2003} }