The impact of mobile application piracy on legitimate sales

Abstract

With the emergence and fast growing of smart mobile phones and mobile application business, the piracy of these new fashioned digital good follows. The piracy phenomenon of these new types of digital goods has attracted debates on the impact of piracy on legitimate sales. While the application developers claim that piracy harms their profits, proponents of piracy argue that they have justified reasons for the activities as piracy of mobile applications does not necessarily harm developers? profits. This paper examines the impact of mobile application piracy on legitimate sales by collecting both the sales ranking data from the mobile applications? official website and the pirating downloads data from 91? in China. We use an application level fixed effect panel model to estimate the effect followed by other robustness-checking models. The result provides evidences that piracy activities have generally promoted the legitimate sales through sampling effect and word of mouth effect.