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

Author

Listed:
  • 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.

Suggested Citation

  • Kresimir Zigic & Jiri Strelicky & Michael Kunin, 2013. "The Interaction between Private and Public IPR Protection in a Software Market: A Positive and Normative Analysis," CERGE-EI Working Papers wp490, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp490
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    References listed on IDEAS

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    1. Sanjay Jain, 2008. "Digital Piracy: A Competitive Analysis," Marketing Science, INFORMS, vol. 27(4), pages 610-626, 07-08.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    vertically differentiated duopoly; software piracy; Bertrand competition; private and public intellectual property rights protection;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • 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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