Why Software Piracy Rates Differ – A Theoretical Analysis

Sougata Poddar ()

Departmental Working Papers from National University of Singapore, Department of Economics

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 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.

Keywords: Software piracy; Copyright Violations; R&D; Raising rival’s Cost; Deterrence; Product reliability; Income gap (search for similar items in EconPapers)
JEL-codes: D23 D43 L13 L86 (search for similar items in EconPapers)
Date: 2005-12

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Persistent link: http://EconPapers.repec.org/RePEc:nus:nusewp:wp0515

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