Network externality and software piracy

Arbeitspapier

The pervasiveness of the illegal copying of software is a worldwide phenomenon. Software piracy implies a huge loss of potential customers of original software buyers, which directly translates into revenue losses for the software industry. Given this, conventional wisdom would suggest the need for the legal software firms and governments to take a harsh approach on piracy of software. Interestingly, there is a trend of literature, which establishes that it is actually profitable for the original software developer to allow limited piracy in the presence of network externality. The present paper wishes to demonstrate that these results cannot be accepted as a general explanation for the existence of software piracy in the real world. To prove the point, this paper comes up with a model where it shows that in the presence of intense effect of network externality, protection as opposed to allowing piracy is always optimal for the original software developer. It also shows that the incentive to protect is even higher with the presence of network externality as opposed to the case of no network externality. Whether piracy is profitable or not to the original developer depends on the market structure, demand environment and the nature of the competition. – copyright ; software piracy ; network externality ; market structure ; competition

Object Details

• ISBN: 929190371X
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WIDER Discussion Paper ; No. 2002/115

Classification and Topics

• Classification: Wirtschaft ; Organizational Behavior; Transaction Costs; Property Rights ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets ; Information and Internet Services; Computer Software
• Subject: Software ; Produktpiraterie ; Network Externalities ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Poddar, Sougata
• Event: Veröffentlichung
• (who): The United Nations University World Institute for Development Economics Research (UNU-WIDER)
• (where): Helsinki
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/53107
• Last update: 10.03.2025, 11:44 AM CET