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How Does Public IPR Protection Affect its Private Counterpart? Copyright and the Firms' Own IPR Protection in a Software Duopoly

Kresimir Zigic, Jiri Strelicky and Michael Kunin

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: We study how the strength of public intellectual property rights (IPR) protection against software piracy (copyright protection) affects private IPR protection (that software developers may themselves undertake to protect their IPR). There are two software developers that offer a product variety of differing (exogenously given) quality and compete in prices for heterogeneous users, who make a choice whether to buy a legal version, use an illegal copy (if they can), or not use a product at all. Using an illegal version violates IPR and is thus punishable when disclosed. If a developer considers the level of piracy as high, he can introduce a form of physical protection for his software or digital product. The main aim of our analysis is to study how the level and the change of public IPR protection affect the pricing and IPR protection strategies of software developers. In particular, we are interested in establishing when the two forms of IPR protection (public and private) are complements to each other, when are they substitutes and when a change in public IPR has no impact on private IPR protection.

Keywords: vertically differentiated duopoly; software piracy; Bertrand competition; copyright protection; private and public intellectual property rights protection (search for similar items in EconPapers)
JEL-codes: D43 L11 L21 O25 O34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind, nep-ino, nep-ipr, nep-pr~ and nep-iue
Date: 2014-10
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