Just my own two cents, based on my understanding of human psychology and market behavior: stopping piracy would have a minimal impact on sales at best. Generally speaking, people will pay close to what they feel something is worth. If they pay more than they feel it's worth, they have a tendency to feel cheated and are more likely to resort to underhanded tactics later to get something (or they'll refuse to buy any more until prices go down and leave it at that). If they pay less than they feel it's worth, they tend to be more inclined to continue buying at that price until it stops being that way.
That said, those who resort to piracy and modding tend to be on the far end of the "costs too much" spectrum. Meaning that, even if those weren't options, they would still not willingly pay full price for these goods and services. There is no real surprise in this: a logical consideration of supply and demand mechanics reveals that, at equilibrium of supply and demand, there is still a mass of consumers not buying the product because it's too expensive for them. Piracy and modding is, by and large, this surplus of unsatisfied consumers that market equilibrium cannot fulfill. Meaning that, in attacking illegal and extralegal activities, you're by and large attacking consumers who wouldn't buy your product anyway because they feel it's too expensive.
So let's take the psychology of this a step further and analyze how a customer reacts to this sort of thing. A customer who has been attacked for not paying what they feel is an unfair price will not simply give up and pay the unfair price. In all but the most passive cases, they will set themselves against the industry that has attacked them instead, and lower their expected price even more, because clearly the industry has no interest in them anyway. In essence, attacking piracy alienates potential customers you could get by lowering prices.
There is this simplistic and unrealistic idea going about that, if you don't fight piracy, everybody will resort to it in the end. However, this goes against one of the most basic tenets of societies world-wide: that we are trained from a very early age to provide recompense for goods and services. While there are a select few who reject this, most of us do not. And to assume that greed will undo this social programming for all individuals is more than just madness, it's nonsensical. This argument essentially invalidates itself, since if it were true, society would never have risen and anarchy would be rampant, due to humans everywhere rejecting basic social programming that allows us to live closely together without trying to kill and rob each other blind.
The tl;dr version of all this is that piracy is only harmful to the market in the minds of those who have not considered the reality of why society even works in the first place.
Sky Render - Sanity is for the weak.
