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A strategic approach to software protection

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  • SHY, Oz
  • THISSE, Jacques-François

Abstract

This paper demonstrates that there is a strategic reason why software firms have followed consumers' desire to drop software protection. We analyze software protection policies in a price‐setting duopoly software industry selling differentiated software packages, where consumers' preference for particular software is affected by the number of other consumers who (legally or illegally) use the same software. Increasing network effects make software more attractive to consumers, thereby enabling firms to raise prices. However, it also generates a competitive effect resulting from feircer competition for market shares. We show that when network effects are strong, unprotecting is an equilibrium for a noncooperative industry.
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Suggested Citation

  • SHY, Oz & THISSE, Jacques-François, 1999. "A strategic approach to software protection," LIDAM Reprints CORE 1413, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1413
    DOI: 10.1111/j.1430-9134.1999.00163.x
    Note: In : Journal of Economics & Management Strategy, 8(2), 163-190, 1999
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    References listed on IDEAS

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    1. Liebowitz, S J, 1985. "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 945-957, October.
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    4. Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-246, April.
    5. Neil Gandal, 1994. "Hedonic Price Indexes for Spreadsheets and an Empirical Test for Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 160-170, Spring.
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