Economics of shareware: How do uncertainty and piracy affect shareware quality and brand premium?

Authors:
Wendy Hui;Byungjoon Yoo;Kar Yan Tam
Affiliations:
College of Information Technology, Zayed University, Abu Dhabi, United Arab Emirates;College of Business Administration, Seoul National University San 56-1, Shinlim-Dong, Kwanak-Gu, Seoul, Korea;Department of Information and Systems Management, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong
Venue:
Decision Support Systems
Year:
2008

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Abstract

Increased network speed has opened up new opportunities for developers to distribute their products as shareware through the Internet. This paper analyzes the interrelationships among key issues that are central to the software industry, including uncertainty, piracy, shareware quality and full version price. We show that customers' aversion to uncertainty of software quality tends to increase shareware quality while piracy tends to decrease it. Counter-intuitively, the perceived quality of the full version software or the trust towards the software developer does not affect the full version price and the profit of the firm when piracy is prevalent.