The Nature and Incidence of Software Piracy: Evidence from Windows

Susan Athey, Scott Stern

This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book Economic Analysis of the Digital Economy, Avi Goldfarb, Shane Greenstein, and Catherine Tucker, editors
Conference held June 6-7, 2013
Forthcoming from University of Chicago Press

This chapter evaluates the nature, relative incidence, and drivers of software piracy. The authors measure piracy for a specific product - Windows 7 - which was associated with a significant level of private sector investment. Using anonymized telemetry data, the authors characterize how piracy occurs, the relative incidence of piracy across different economic and institutional environments, and the impact of enforcement efforts on choices to install pirated versus paid software. The authors find that: (a) most "retail piracy" can be attributed to a small number of widely distributed "hacks" available through the Internet, (b) the incidence of piracy varies significantly with the microeconomic and institutional environment, and (c) software piracy primarily focuses on the most "advanced" version of Windows (Windows Ultimate). After controlling for a small number of measures of institutional quality and broadband infrastructure, one important candidate driver of piracy - GDP per capita - has no significant impact on the observed piracy rate, while the innovation orientation of an economy is associated with a lower rate of piracy. Finally, the authors evaluate how piracy changes in response to country-specific anti-piracy enforcement efforts against specific peer-to-peer websites; overall, they find no evidence that such efforts have affected the incidence of software piracy.

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This paper was revised on June 2, 2014

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This chapter first appeared as NBER working paper w19755, The Nature and Incidence of Software Piracy: Evidence from Windows, Susan Athey, Scott Stern
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