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Sensitivity To Tax Revenues and Optimal Anti-piracy Policy Instruments

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  • D Banerjee

Abstract

Abstract: We examine the effects of a government’s sensitivity to its tax revenues, earned from the software industry, on its anti-piracy policies that consists of monitoring and penalizing a commercial software pirate. We consider a strategic entry-deterrence framework where the original producer chooses a pricing strategy that either allows or deters the pirate’s entry. Sensitivity to tax revenues is a necessary but not a sufficient condition to prevent piracy. Welfare maximization may or may not result in monitoring as the socially optimal outcome. If monitoring is socially optimal then the pirate’s entry is deterred. The equilibrium entry-deterring price may be less than the equilibrium monopoly price. Only in the extreme case the monopoly outcome is restored.

Suggested Citation

  • D Banerjee, 2004. "Sensitivity To Tax Revenues and Optimal Anti-piracy Policy Instruments," Econometric Society 2004 Australasian Meetings 330, Econometric Society.
    • Handle: RePEc:ecm:ausm04:330
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    References listed on IDEAS

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    1. Oz Shy & Jacques‐Françlois Thisse, 1999. "A Strategic Approach to Software Protection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 163-190, June.
    2. Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
    3. Fernando Nascimento & Wilfried R. Vanhonacker, 1988. "Optimal Strategic Pricing of Reproducible Consumer Products," Management Science, INFORMS, vol. 34(8), pages 921-937, August.
    4. Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 155-166, June.
    5. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Keywords:Accommodating strategy; Aggressive strategy; Commercial piracy; Sensitivity factor.;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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