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Copyright and firms’ own IPR protection in a software market: Monopoly versus duopoly

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  • Žigić, Krešimir
  • Střelický, Jiří
  • Kúnin, Michael

Abstract

In a duopoly, we study the interaction between public (copyright) and private protection of intellectual property rights (IPR). Software developers offer products with differing qualities and compete for heterogeneous users, who may buy a legal version, an illegal copy, or no product. Illegal usage is punishable when caught. A developer decides whether to use private IPR protection, given the degree of public IPR protection. We analyze the impact of private and public IPR protection on the developers’ pricing, using monopoly as a benchmark. We show that monopoly pricing is not marginally affected by either public or private protection. We also show that both types of protection may affect duopoly pricing by softening price competition. Finally, we find the interaction between public and private protection in a duopoly but not in a monopoly. Moreover, strategic substitutability and complementarity can exist between the public and private IPR, depending on the strength of the copyright.

Suggested Citation

  • Žigić, Krešimir & Střelický, Jiří & Kúnin, Michael, 2023. "Copyright and firms’ own IPR protection in a software market: Monopoly versus duopoly," Economic Modelling, Elsevier, vol. 123(C).
    • Handle: RePEc:eee:ecmode:v:123:y:2023:i:c:s0264999323000949
    DOI: 10.1016/j.econmod.2023.106282
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    More about this item

    Keywords

    Vertically differentiated duopoly; Software piracy; Bertrand competition; Copyright protection; Digital rights management; 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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