"and sometimes set up their own online authentication systems to give people the feeling they have a legitimate product" The fragment above is as close as this

"and sometimes set up their own online authentication systems to give people the feeling they have a legitimate product" The fragment above is as close as this article's author gets to what I believe to be the core economic argument for Microsoft's anti-piracy strategy. Someone who would never think of spending $300 for a legitimate MS Office license might pay $3 for a DVD from a street vendor knowing full well that the DVD is pirated. People making such a purchase almost always know that they are not buying a legitimate copy. These sales are only one small step away from just downloading a copy of Office via torrent. What rationally must concern Microsoft is when consumers pay tens of dollars for "discounted" software with the belief that they are purchasing a legit license. That's likely lost revenue for Microsoft (only "likely" because the consumer might not have paid the higher price of a legit copy). Imagine that I went into a diner where servers "self bank" (take cash payments directly, usually using an apron with money pockets), pretended to be a server, and presented customers with fake checks. The customers would pay me and leave thinking that they had completed a legitimate transaction. Obviously, the restaurant's top line suffers, but this sort of theft is worse than if those same customers entered the restaurant with the intent to dine & dash. Why? Because they probably wouldn't have eaten there if an armed guard had been checking receipts at the door. So, the restaurant is out only its marginal cost (probably just the cost of the food if seats were still available, about 30% of the check on average across the restaurant industry). So, while these two kinds of theft might seem identical on the surface, the one where I pose as a fake waiter is over three times as costly for the restaurant. The market for fake designer handbags is similar. There are two categories of fake goods: those designed to fool the buyer, and those simply manufactured only well enough to convince the buyer that others will perceive the good to be legit. Most luxury purses have internal markings (gilded logos, etc.) which help identify the brand, but only to the owner (presuming that she is the only person who actually sees the inside). If the buyer knows the purse to be fake but desires to impress those who see her carrying it, there's little incentive to pay extra for a purse with replicated innards. However, if a merchant wants to sell a fake handbag for a good price to a buyer who thinks it legit, the details had better match up with those observable at Saks. Handbag manufacturers rationally spend most of their time going after those producing the high quality fakes as those have an immediate impact on revenue. Unlike Microsoft, there is also a strong incentive to attack the market for real-from-a-distance knockoffs as the economic signalling effect of a $1K handbag is weakened when the public computes the likelihood to be low of an arbitrary woman with such a bag to be carrying a legit version. I was disappointed by the shallowness of the NYT's analysis in the article. Surely its readers expect a bit more depth?