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Pricing under the Threat of Piracy: Flexibility and Platforms for Digital Goods

Dirk Bergemann, Thomas Eisenbach, Joan Feigenbaum () and Scott Shenker
Additional contact information
Joan Feigenbaum: Dept. of Computer Science, Yale University
Scott Shenker: ICSI and Dept. of Electrical Engineering and Computer Science, University of California, Berkeley

No 1834, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We consider the optimal design of flexible use in a digital-rights-management policy for a digital good subject to piracy. Consumers can acquire the digital good either as a licensed product or as an unlicensed copy. The ease of access to unlicensed copies is increasing in the flexibility accorded to licensed copies. The content provider has to trade off consumers' valuation of a licensed copy against the sales lost to piracy. We enrich the basic model by introducing a "secure platform" that is required to use the digital good. We show that the platform allows for the socially optimal provision of flexibility for the digital good but only if both are sold by an integrated firm.

Keywords: Digital goods; Digital rights management; Platform; Flexibility; Piracy (search for similar items in EconPapers)
JEL-codes: C79 D42 L15 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2011-11
New Economics Papers: this item is included in nep-cul, nep-ipr and nep-pr~
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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