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The impact of piracy on prominent and non-prominent software developers

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  • Rasch, Alexander
  • Wenzel, Tobias

Abstract

This paper studies the impact of software piracy on prominent and non-prominent software developers in markets based on a two-sided platform business. Consumer behavior is imperfect and, when adopting a platform, consumers only take prominent software into account. We show that prominent software exhibits higher piracy rates than non-prominent software. However, contrary to intuition, this does not necessarily mean that prominent software developers benefit more from increased software protection. Indeed, we show that prominent developers may lose out whereas non-prominent developers may gain from better software protection.

Suggested Citation

  • 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).
  • Handle: RePEc:zbw:dicedp:167
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    References listed on IDEAS

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    1. Spiegler, Ran, 2014. "Bounded Rationality and Industrial Organization," OUP Catalogue, Oxford University Press, number 9780199334261.
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    3. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    4. Christiaan Hogendorn & Stephen Ka Yat Yuen, 2009. "PLATFORM COMPETITION WITH 'MUST-HAVE' COMPONENTS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 57(2), pages 294-318, June.
    5. Zhou, Jidong, 2009. "Prominence and Consumer Search: The Case With Multiple Prominent Firms," MPRA Paper 12554, University Library of Munich, Germany.
    6. 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.
    7. Mark Armstrong & John Vickers & Jidong Zhou, 2009. "Prominence and consumer search," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 209-233.
    8. repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
    9. Mark Armstrong & Jidong Zhou, 2011. "Paying for Prominence," Economic Journal, Royal Economic Society, vol. 121(556), pages 368-395, November.
    10. Mark Armstrong & John Vickers, 2012. "Consumer Protection and Contingent Charges," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 477-493, June.
    11. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters,in: Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74 Edward Elgar Publishing.
    12. Rasch, Alexander & Wenzel, Tobias, 2013. "Piracy in a two-sided software market," Journal of Economic Behavior & Organization, Elsevier, vol. 88(C), pages 78-89.
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    More about this item

    Keywords

    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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