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Software Piracy: An Analysis of Protection Strategies
Kathleen Reavis Conner and Richard P. Rumelt
Vol. 37, No. 2 (Feb., 1991), pp. 125-139
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/2632386
Page Count: 15
You can always find the topics here!Topics: Piracy, Pirates, Prices, Computer software, Economic externalities, Capital costs, Market prices, Software piracy, Software industry, Customers
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Software piracy by users is generally believed to harm both software firms (through lower profits) and buying customers (through higher prices). Thus, it is thought that perfect and costless technological protection would benefit both firms and consumers. The model developed here suggests that in some circumstances, even with significant piracy, not protecting can be the best policy, both raising firm profits and lowering selling prices. Key to the analysis is joining the presence of a positive network externality with the fact that piracy increases the total number of program users. The network externality exists because consumers have an incentive to economize on post-purchase learning and customization costs.
Management Science © 1991 INFORMS