This paper studies the market effects of unauthorized copying of commercial software. A model is constructed in which a firm facesconsumers some of which form "copying groups". Such copyingmodifies the demand for originals but does not simply shift it to the left. This approach takes into consideration both the extensive and intensive dimensions of copying. A finding of the paper is that pricetends to increase with more unauthorized copying; moreover, making copying more costly to potential violators in the face of alreadyrampant copying may actually lead to less profit. These results canexplain certain recent, interesting phenomena in the U.S. PC software industry.