A general equilibrium analysis of software development : copyright protection and contract enforcement

Research output: Journal PublicationsJournal Article (refereed)

8 Citations (Scopus)


We develop a general equilibrium model to study the implications of a legal environment on the organization of software production. We show that contract enforcement determines the organizational mode (i.e., in-house versus outsourcing) of customized software development while copyright protection affects both packaged software as well as customized software development. We obtain some testable results: when copyright protection is weak, only customized software will be developed; when copyright protection is strong, both customized software and packaged software will be developed; environment changes in one software market affect the equilibrium in the other software market.
Original languageEnglish
Pages (from-to)1661-1682
Number of pages22
JournalEuropean Economic Review
Issue number7
Early online date22 Sep 2005
Publication statusPublished - Oct 2006
Externally publishedYes


Bibliographical note

Financial support by a grant from HKUST (DAG03/04.BM28).


  • Software
  • Piracy
  • Copyright protection
  • Contract enforcement
  • Vertical integration
  • Contract
  • Organization
  • Outsourcing

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