How Much Anti-Piracy Effort is Too Much? - a Study of the Global Software Industry

39 Pages Posted: 26 Oct 2005

See all articles by Bin Gu

Bin Gu

Boston University - Department of Management Information Systems

Vijay Mahajan

University of Texas at Austin - Department of Information, Risk and Operations Management

Date Written: February 2005

Abstract

Piracy is commonly considered to be detrimental to the software industry. The industry has taken aggressive steps to curb piracy worldwide. This study questions the wisdom of such aggressive anti-piracy effort in a competitive environment. We show that piracy attracts the most price sensitive consumers. By removing these consumers from the market, piracy reduces firms' incentive to engage in self-destructing price competition. In equilibrium, piracy can increase the industry profit in markets with large variations in consumer price sensitivity. Using software sales and piracy data from 50 countries between 1996 and 2002, we find that anti-piracy effort has indeed hurt the software industry in such markets.

Keywords: piracy, digital piracy, intellectual property, software, competition

JEL Classification: C23, D31, D43, L13, L86, O34

Suggested Citation

Gu, Bin and Mahajan, Vijay, How Much Anti-Piracy Effort is Too Much? - a Study of the Global Software Industry (February 2005). McCombs Research Paper, Available at SSRN: https://ssrn.com/abstract=825165 or http://dx.doi.org/10.2139/ssrn.825165

Bin Gu (Contact Author)

Boston University - Department of Management Information Systems ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Vijay Mahajan

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

Red McCombs School of Business
2100 Speedway, #B6600
Austin, TX 78712
United States

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