Piracy in a two-sided software market

This paper studies the impact of software piracy in a two-sided-market setting. Software platforms attract developers and users to maximize their profits. The equilibrium price structure is affected by piracy: license fees to developers are higher with more software protection but the impact on user prices is ambiguous. A conflict between platforms and software developers over software protection may arise: whereas one side benefits from better protection, the other party loses out. Under platform compatibility, this conflict is no longer present.

► We study piracy in software markets that are organized as platforms. ► A conflict of interest over software protection between software developers and platforms emerge. ► License fees to developers increase with protection while users prices may fall.