Promotional piracy

Abstract

Unauthorized copying of goods can displace current sales. At the same time, those who pirate a product may help alert others to its existence, leading to stronger future demand. I discuss a simple model which leaves room for both effects. Piracy's net profit impact is linked to the whereabouts of people in the space of willingness‐to‐pay and personal piracy cost. Considerations of location help demystify empirical puzzles, such as why some (computer games manufacturers) deploy stringent copy protection when elsewhere (business software) controls appear more relaxed.