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.
- Two-sided market