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Modeling Software Piracy Protection: Monopoly versus Duopoly

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  • Kresimir Zigic
  • Jiri Strelicky
  • Michael Kunin

Abstract

The economic analyses of software piracy typically rely on the simplifying assumption that the product is o¤ered by a single producer. We argue that a realistic description of the software market and associated economic aspects of software piracy might be also captured by studying competition between software developers. Using an illegal version of software violates intellectual property rights (IPR) and, due to public protection (such as copyrights), is punishable when discovered. If a developer nonetheless considers the level of piracy to be high, he may introduce his own private protection. The focus of our analysis is on the interaction between public and private IPR protection in the two market structures under considerations. We show that, unlike in cases of monopolies, there is no conflict of interest between the regulator and producers in duopoly setup. Moreover, unlike in a monopoly, the optimal public IPR protection in duopoly does not affect the developers' choice of software quality.

Suggested Citation

  • Kresimir Zigic & Jiri Strelicky & Michael Kunin, 2015. "Modeling Software Piracy Protection: Monopoly versus Duopoly," CERGE-EI Working Papers wp551, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp551
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    References listed on IDEAS

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    More about this item

    Keywords

    software piracy; private and public IPR protection; quality and competition effects; vertically differentiated duopoly;
    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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