What is the True Loss Due to Piracy?: Evidence from Microsoft Office in Hong Kong

Tin Cheuk Leung (leungtc@wfu.edu)

MPRA Paper from University Library of Munich, Germany

Abstract: Software piracy remains rampant despite the successful measures the Hong Kong government has taken to eradicate street piracy. This is because most people prefer substituting a counterfeit copy of a software CD (street piracy) with an illegal download of the software (Internet piracy). To support this claim, I construct a unique data set from 281 college students in Hong Kong to demonstrate two things. First, I estimate a random-coefficient discrete choice demand system for Microsoft Office from legal and different illegal sources. Estimates obtained from a Bayesian approach, with a mixture of normal priors, indicate a strong substitution pattern between street piracy and Internet piracy. Second, I conduct counterfactuals in which street piracy is absent. Results are twofold. First, most students would switch to Internet piracy. Second, the government, by assuming that each pirated copy represents a lost sale, may over-estimate the gain from eradicating piracy by up to nine times.

Keywords: software piracy; bayesian; conjoint analysis (search for similar items in EconPapers)
JEL-codes: K42 L86 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-ict, nep-ipr, nep-pr~ and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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