Economics is great.

I was chatting with a former Microsoft manager the other day and he revealed that after much analysis Microsoft had realized that some piracy is not only inevitable, but could actually be economically optimal. The reason is counterintuitive, but intriguing. The usual price-setting method is to look at the entire potential market, from the many at the economic lower end to the few at the top, and set a price somewhere in between the top and bottom that will maximize total revenues. But if you cede the bottom to piracy, you can set a price between the top and the middle. The result: higher revenues per copy, and potentially higher revenues overall. (This is, by the way, the opposite of the conventional economic approach to developing-world piracy, which is to lower the cost of a product closer to the pirate version, closing the pricing gap to try to win customers over to the official version. In practice, however, the pirate price is so low that it’s rarely possible to close that gap enough to make much of a difference.)

Don’t know how true this is in the specifics but in the general case it’s very interesting.