How Can Proprietary Software Firms Take Advantage Over Open Source Communities? Another Story of Profitable Piracy

T. Le Texier () and Mourad Zeroukhi ()
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T. Le Texier: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Mourad Zeroukhi: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper analyzes the strategic incentives of a proprietary software (PS) firm to manipulate software copy protection in response to the diffusion of pirate proprietary software (PPS) copies, as well as software compatibility/incompatibility with an alternative open source software (OSS) solution. We show that the existence of software piracy enables the PS firm to achieve higher profits than when piracy is prevented. A key mechanism at work is that investing in software copy protection allows the PS firm to increase the price of its PS product. From a regulatory point of view, we find that software compatibility with the OSS solution is a necessary condition to achieve a welfare-improving equilibrium, whereas the welfare-enhancing feature of piracy is not always proved.

Keywords: Compatibility; Copy protection; Externalities; Open source software; Piracy; Pro-prietary software (search for similar items in EconPapers)
Date: 2022
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Published in Revue d'économie industrielle , 2022, 177 (1), pp.103-136. ⟨10.4000/rei.11288⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03718319

DOI: 10.4000/rei.11288

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