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Price Competition on the Market of Counterfeiting Software

Author

Listed:
  • Nikolay Zenkevich

    (Graduate School of Management, St. Petersburg State University, Volkhovsky per., 3, St. Petersburg, 199004, Russia)

  • Margarita Gladkova

    (Graduate School of Management, St. Petersburg State University, Volkhovsky per., 3, St. Petersburg, 199004, Russia)

Abstract

In this paper, the market of software products is considered. Regularly this market is suffering from existence of counterfeit or pirate products which causes problems and challenges for original software developers. Taking this fact into account the paper is trying to solve the problem of price competition on this market. The software company set the price and the quality of the software product while the counterfeit or pirate company suggests the consumers the product of the lower quality. First the general model is analyzed and price equilibrium is defined. Second, the monopoly case is considered separately and optimal software price is defined. Finally, it is supposed that there are two companies that produce original software on the market who compete and differentiate in product quality, and there are two pirate companies who produce the same type of software. The duopoly case is analyzed and equilibrium prices for competing companies are obtained in the explicit form.

Suggested Citation

  • Nikolay Zenkevich & Margarita Gladkova, 2016. "Price Competition on the Market of Counterfeiting Software," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 1-10, June.
    • Handle: RePEc:wsi:igtrxx:v:18:y:2016:i:02:n:s0219198916400065
    DOI: 10.1142/S0219198916400065
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    References listed on IDEAS

    as
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    5. Jie Zhang & L. Hong & Rachel Zhang, 2012. "Fighting strategies in a market with counterfeits," Annals of Operations Research, Springer, vol. 192(1), pages 49-66, January.
    6. Dave Furth, 2011. "Duopoly Models With Vertical Product Differentiation," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 121-140.
    7. Rasch, Alexander & Wenzel, Tobias, 2013. "Piracy in a two-sided software market," Journal of Economic Behavior & Organization, Elsevier, vol. 88(C), pages 78-89.
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