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Piracy in a two-sided software market

Author

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  • Rasch, Alexander
  • Wenzel, Tobias

Abstract

This paper studies the impact of software piracy in a two-sided-market setting. Software platforms attract developers and users to maximize their profits. The equilibrium price structure is affected by piracy: license fees to developers are higher with more software protection but the impact on user prices is ambiguous. A conflict between platforms and software developers over software protection may arise: whereas one side benefits from better protection, the other party loses out. Under platform compatibility, this conflict is no longer present.

Suggested Citation

  • Rasch, Alexander & Wenzel, Tobias, 2013. "Piracy in a two-sided software market," Journal of Economic Behavior & Organization, Elsevier, vol. 88(C), pages 78-89.
  • Handle: RePEc:eee:jeborg:v:88:y:2013:i:c:p:78-89
    DOI: 10.1016/j.jebo.2013.01.009
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    References listed on IDEAS

    as
    1. Bae, Sang Hoo & Choi, Jay Pil, 2006. "A model of piracy," Information Economics and Policy, Elsevier, vol. 18(3), pages 303-320, September.
    2. Yoon, Kiho, 2002. "The optimal level of copyright protection," Information Economics and Policy, Elsevier, vol. 14(3), pages 327-348, September.
    3. Joshua Slive & Dan Bernhardt, 1998. "Pirated for Profit," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 886-899, November.
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    7. Ralf Dewenter & Justus Haucap & Tobias Wenzel, 2012. "On File Sharing With Indirect Network Effects Between Concert Ticket Sales and Music Recordings," Journal of Media Economics, Taylor & Francis Journals, vol. 25(3), pages 168-178, September.
    8. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
    9. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    10. Andrei Hagiu, 2009. "Two-Sided Platforms: Product Variety and Pricing Structures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 1011-1043, December.
    11. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    12. Martin Peitz, 2004. "A Strategic Approach to Software Protection: Comment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(2), pages 371-374, June.
    13. repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
    14. Gayer, Amit & Shy, Oz, 2006. "Publishers, artists, and copyright enforcement," Information Economics and Policy, Elsevier, vol. 18(4), pages 374-384, November.
    15. Peitz, Martin & Waelbroeck, Patrick, 2006. "Piracy of digital products: A critical review of the theoretical literature," Information Economics and Policy, Elsevier, vol. 18(4), pages 449-476, November.
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    18. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
    19. repec:rje:randje:v:37:y:2006:3:p:668-691 is not listed on IDEAS
    20. Kiema, Ilkka, 2008. "Commercial piracy and intellectual property policy," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 304-318, October.
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    Citations

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    Cited by:

    1. Ralf Dewenter & Justus Haucap & Tobias Wenzel, 2012. "On File Sharing With Indirect Network Effects Between Concert Ticket Sales and Music Recordings," Journal of Media Economics, Taylor & Francis Journals, vol. 25(3), pages 168-178, September.
    2. Shekhar, Shiva, 2017. "Homing choice and platform pricing strategy," DICE Discussion Papers 247, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Rasch, Alexander & Wenzel, Tobias, 2014. "The impact of piracy on prominent and non-prominent software developers," DICE Discussion Papers 167, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Gold, Alex & Hogendorn, Christiaan, 2016. "Tipping in two-sided markets with asymmetric platforms," Economic Analysis and Policy, Elsevier, vol. 50(C), pages 85-90.
    5. 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.
    6. Thomes, Tim Paul, 2015. "In-house publishing and competition in the video game industry," Information Economics and Policy, Elsevier, vol. 32(C), pages 46-57.
    7. repec:dug:journl:y:2016:i:2:p:102-118 is not listed on IDEAS

    More about this item

    Keywords

    Developer; Piracy; Platform; Software; Two-sided market;

    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

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