Nunes, Hsee and Weber (2004)
|Nunes, Hsee and Weber (2004)|
|Title:||Why are people so prone to steal software? The effect of cost structure on consumer purchase and payment intentions|
|Author(s):||Nunes, J. C., Hsee, C. K., Weber, E. U.|
|Citation:||Nunes, J. C., Hsee, C. K., & Weber, E. U. (2004). Why are people so prone to steal software? The effect of cost structure on consumer purchase and payment intentions. Journal of Public Policy and Marketing, 23(1), 43-53.|
|Link(s):||Definitive , Open Access|
|Key Related Studies:|
|About the Data|
|Data Description:||This research is comprised of 3 studies:
Study 1, comprised of two parts; participants in the first part of Study 1 were 128 undergraduate business students. Participants in the second part of Study 1 were 119 students from the same pool of students but who had not participated in Part 1. Study 2; participants were 200 undergraduate students. Study 3; participants were 140 undergraduate business students.
|Data Type:||Primary data|
|Secondary Data Sources:|
|Data Collection Methods:|
|Data Analysis Methods:|
|Cross Country Study?:||No|
|Government or policy study?:||No|
|Time Period(s) of Collection:||
Intellectual property piracy is a significant global problem and an enormous problem for U.S. companies and policymakers. This article examines why typically law-abiding people are more inclined to steal intellectual property products than more tangible, material products. The authors propose that the inclination to pay for certain types of goods and services is greater than for other types, and what distinguishes the two classes is their cost structure. They document how consumers are more or less inclined to pay for goods and services as a function of whether the product’s cost is principally attributable to variable cost (VC) or fixed cost (FC). The authors’ central thesis is that consumers (1) believe that they cause less harm if their failure to pay prevents a seller from recovering FC than if their failure to pay helps a seller recoup VC; (2) are more likely to risk not paying for a product the less harm they perceive that not paying would cause; and (3) therefore feel less obligated and are less likely to pay voluntarily for a high-FC, low-VC product than for a high-VC, low-FC product, when total cost and average cost are held constant. This research is particularly relevant in the information age, because it helps explain why consumers appear to be more inclined to risk stealing software and other intellectual property products with relatively high FC and little or no VC. It also allows for the creation of marketing remedies that do not involve further legal enforcement.
Main Results of the Study
This research shows that:
- consumers are much less intent on paying for or willing to pay less for products with relatively low variable cost (VC) and high fixed cost (FC), such as information products, than for products with a high ratio of VC to FC, such as more conventional tangible products. This may help explain why ordinarily law-abiding people are more likely to steal intangible products than material goods.
- Consumers perceive failure to pay for a high-VC product as inflicting greater harm to a seller than failure to pay for a high-FC product. This is because consumers perceive amounts paid in excess of VC as a gain to the seller, and they perceive failure to cover the seller’s VC as inflicting a loss. Consumers are more likely to pay for a product the more harm they believe that not paying would cause.
- This study has implications for consumer perceptions of fair price. Much of what consumers perceive as fair depends on how they believe that prices and a firm’s motive for charging prices affect firm or producer profitability. A price increase without a cost increase raises profits and is considered less fair than is a price increase associated with a cost increase.
Policy Implications as Stated By Author
This research may help provide alternatives to the costly enforcement associated with legal remedies by providing practical ideas for ways firms can foster greater payment intentions among consumers. A prescription for marketers (manufacturers and sellers) of high fixed products is to better communicate a more accurate representation of total costs to consumers. Another way to increase consumers’ payment and purchase intentions is simply to increase the recognizable variable cost and thus to increase the ratio of variable cost to fixed cost.
Coverage of Study
|Level of aggregation:||Individual|
|Period of material under study:||Not stated|