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How Can Proprietary Software Firms Take Advantage Over Open Source Communities? Another Story of Profitable Piracy

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  • Thomas Le Texier
  • Mourad Zeroukhi

Abstract

This paper analyzes the strategic incentives of a proprietary software (PS) firm to manipulate software copy protection in response to the diffusion of pirate proprietary software (PPS) copies, as well as software compatibility/incompatibility with an alternative open source software (OSS) solution. We show that the existence of software piracy enables the PS firm to achieve higher profits than when piracy is prevented. A key mechanism at work is that investing in software copy protection allows the PS firm to increase the price of its PS product. From a regulatory point of view, we find that software compatibility with the OSS solution is a necessary condition to achieve a welfare-improving equilibrium, whereas the welfare-enhancing feature of piracy is not always proved. JEL classification: L11, L82, L86.

Suggested Citation

  • Thomas Le Texier & Mourad Zeroukhi, 2022. "How Can Proprietary Software Firms Take Advantage Over Open Source Communities? Another Story of Profitable Piracy," Revue d'économie industrielle, De Boeck Université, vol. 0(1), pages 103-136.
    • Handle: RePEc:cai:reidbu:rei_177_0103
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    More about this item

    Keywords

    externalities; compatibility; copy protection; open source software; piracy; proprietary software;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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