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The Interaction between Private and Public IPR Protection in a Software Market: A Positive and Normative Analysis

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  • Kresimir Zigic
  • Jiri Strelicky
  • Michael Kunin

Abstract

Two software developers, each offering a product variety of different (exogenously given) quality, compete in prices for heterogeneous users who choose from purchasing a legal version, using an illegal copy, and not using a product at all. Using an illegal version violates intellectual property rights (IPR) and is thus punishable when disclosed. If a developer considers the level of piracy as high, he can introduce protection for his product in the form of restricting support and other services to illegal users. We study the positive and normative implications of the interaction between a regulator's IPR protection and the IPR protection that producers themselves may undertake to protect their IPR against the end users' software piracy. In particular, we aim to establish when the two forms of IPR protections (public and private) act as complements and when as substitutes to each other. Finally, we explore the situations in which there is (or is not) a conflict of interest between the regulator and the developers in this respect.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp490.

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Date of creation: Sep 2013
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Handle: RePEc:cer:papers:wp490

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Related research

Keywords: vertically differentiated duopoly; software piracy; Bertrand competition; private and public intellectual property rights protection;

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  1. Peitz, Martin & Waldfogel, Joel, 2012. "The Oxford Handbook of the Digital Economy," OUP Catalogue, Oxford University Press, number 9780195397840.
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  3. Boom, Anette, 2001. "On the Desirability of Compatibility with Product Selection," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 85-96, March.
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  8. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
  9. Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
  10. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  11. Arun Sundararajan, 2003. "Managing Digital Piracy: Pricing, Protection and Welfare," Law and Economics 0307001, EconWPA.
  12. Sanjay Jain, 2008. "Digital Piracy: A Competitive Analysis," Marketing Science, INFORMS, vol. 27(4), pages 610-626, 07-08.
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