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Software Cracking and Degrees of Software Protection

Author

Listed:
  • Chou Chung-Hui

    (Department of Finance, I-Shou University, Kaohsiung City, 84001, Taiwan, ROC)

Abstract

Progress of hardware technologies and diffusion of computer knowledge enable consumers to crack software if they decide to use software illegally. This paper constructs a software market in which consumers are horizontally differentiated in accordance with social norms of copyright protection to examine the monopolistic producer’s software protection behaviors with considering partial compatibility between genuine and cracked software as well as utility loss from using cracked software. Our research presents the following results. First, when network externalities are weak, the monopolist would set a degree of protection which induces existence of software cracking to enhance consumers’ willingness to pay for genuine software by improving network benefits. Conversely, if network externalities are sufficiently strong, then software producer would set a degree of protection which stop software cracking completely. This implies that stopping software cracking is not possible without network effects. Second, if utility loss from using cracked software is severe (mild), then strengthening (weakening) network externalities or lowering (raising) compatibility may reduce the number of consumers using cracked software and increase software producer’s profits consequently. Finally, we show that the monopolistic producer tends to over-protect software when genuine and cracked software are highly compatible or network externalities are relatively weak which results in inadequate consumers using cracked software for social optimum.

Suggested Citation

  • Chou Chung-Hui, 2023. "Software Cracking and Degrees of Software Protection," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 23(2), pages 577-600, June.
    • Handle: RePEc:bpj:bejtec:v:23:y:2023:i:2:p:577-600:n:9
    DOI: 10.1515/bejte-2021-0029
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    More about this item

    Keywords

    network externalities; partial compatibility; software cracking;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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