Copyright enforcement and product quality signaling in markets for computer software

This paper considers the impact of consumer copying of computer software when there is asymmetric information about product quality. In particular, the paper: (1) examines how the presence of copying can enhance the feasibility of production of high quality software when quality is a priori unknown to consumers and (2) explores the novel possibility that a software producer can signal product quality via its copyright enforcement decision. Under certain conditions, when there is asymmetric information about product quality, providers of high quality software can be made strictly better off with less than full copyright enforcement; in some cases, they do not produce at all in the absence of copying.