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What is the True Loss Due to Piracy?: Evidence from Microsoft Office in Hong Kong

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  • Leung, Tin Cheuk

Abstract

Software piracy remains rampant despite the successful measures the Hong Kong government has taken to eradicate street piracy. This is because most people prefer substituting a counterfeit copy of a software CD (street piracy) with an illegal download of the software (Internet piracy). To support this claim, I construct a unique data set from 281 college students in Hong Kong to demonstrate two things. First, I estimate a random-coefficient discrete choice demand system for Microsoft Office from legal and different illegal sources. Estimates obtained from a Bayesian approach, with a mixture of normal priors, indicate a strong substitution pattern between street piracy and Internet piracy. Second, I conduct counterfactuals in which street piracy is absent. Results are twofold. First, most students would switch to Internet piracy. Second, the government, by assuming that each pirated copy represents a lost sale, may over-estimate the gain from eradicating piracy by up to nine times.

Suggested Citation

  • Leung, Tin Cheuk, 2011. "What is the True Loss Due to Piracy?: Evidence from Microsoft Office in Hong Kong," MPRA Paper 32597, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:32597
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    Cited by:

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    2. Leung, Tin Cheuk, 2015. "Music piracy: Bad for record sales but good for the iPod?," Information Economics and Policy, Elsevier, vol. 31(C), pages 1-12.
    3. Keisuke Hattori & Keisaku Higashida, 2023. "Who should be regulated: Genuine producers or third parties?," Journal of Economics, Springer, vol. 138(3), pages 249-286, April.
    4. Szabó, Andrea & Pham, Vinh, 2022. "Net neutrality and consumer demand in the video on-demand market," Information Economics and Policy, Elsevier, vol. 61(C).
    5. Milan Miric & Lars Bo Jeppesen, 2020. "Does piracy lead to product abandonment or stimulate new product development?: Evidence from mobile platform‐based developer firms," Strategic Management Journal, Wiley Blackwell, vol. 41(12), pages 2155-2184, December.
    6. Kanazawa, Kyogo & Kawaguchi, Kohei, 2022. "Displacement effects of public libraries," Journal of the Japanese and International Economies, Elsevier, vol. 66(C).
    7. Carsten Fink & Keith E. Maskus & Yi Qian, 2016. "The Economic Effects of Counterfeiting and Piracy: A Review and Implications for Developing Countries," The World Bank Research Observer, World Bank, vol. 31(1), pages 1-28.

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    More about this item

    Keywords

    software piracy; bayesian; conjoint analysis;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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