Bae and Choi (2006)
|Bae and Choi (2006)|
|Title:||A Model of Piracy|
|Author(s):||Sang Hoo Bae and Jay Pil Choi|
|Citation:||Bae, Sang Hoo, and Jay Pil Choi. A model of piracy. Information Economics and Policy 18.3 (2006): 303-320.|
|Key Related Studies:|
|Linked by:||Moores (2010)|
|About the Data|
|Data Description:||This study considers the two types of costs associated with piracy: the reproduction cost that is constant across users and the degradation cost that is proportional to consumers’ valuation of the original product. The authors demonstrate that the effects of piracy depend crucially on the nature of piracy costs. The study also uses data on piracy levels published by the Business Software Alliance from 2004.|
|Data Type:||Secondary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||Yes|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
This paper develops a simple model of software piracy to analyze the short-run effects of piracy on software usage and the long-run effects on development incentives. We consider two types of costs associated with piracy: the reproduction cost that is constant across users and the degradation cost that is proportional to consumers’ valuation of the original product. We show that the effects of piracy depend crucially on the nature of piracy costs. Policy implications concerning copyright protection are also discussed.
Main Results of the Study
We demonstrate that with the threat of piracy the monopolist’s price is lowered, and usage of an authorized copy is increased in both regimes with positive welfare implications. This result provides a sharp contrast to the common claims of copyright holders, in which the possibility of piracy reduces demand for a legal copy.
Policy Implications as Stated By Author
- An increase in the level of piracy can lead to an increase in demand for the legitimate good.
- This is in opposition to what many copyright holders argue.
Coverage of Study
|Level of aggregation:||Two types of costs associated with piracy|
|Period of material under study:||1991 - to 2007|
|Level of aggregation:||Piracy data|
|Period of material under study:||2004|