When piracy works ....

Using formal economic modeling, professors Pankaj Ghemawat and Ramon Casadesus-Masanell consider the competitive dynamics of the software wars between Microsoft and open source, an interesting side effect of piracy is observed

"We also look at the effect of piracy and ask whether piracy can ever be beneficial to Microsoft. This extension was motivated by analyzing data on a cross-section of countries on Linux penetration and piracy rates. We found that in countries where piracy is highest, Linux has the lowest penetration rate. The model shows that Microsoft can use piracy as an effective tool to price discriminate, and that piracy may even result in higher profits to Microsoft!"

It effectively reduces the cost to zero but increases the network effect. Understandable but surprising.