Digital Rights Management and the Pricing of Digital Products

Yooki Park and Suzanne Scotchmer

No 11532, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: As it becomes cheaper to copy and share digital content, vendors are turning to technical protections such as encryption. We argue that if protection is nevertheless imperfect, this transition will generally lower the prices of content relative to perfect legal enforcement. However, the effect on prices depends on whether the content providers use independent protection standards or a shared one, and if shared, on the governance of the system. Even if a shared system permits content providers to set their prices independently, the equilibrium prices will depend on how the vendors share the costs. We show that demand-based cost sharing generally leads to higher prices than revenue-based cost sharing. Users, vendors and the antitrust authorities will typically have different views on what capabilities the DRM system should have. We argue that, when a DRM system is implemented as an industry standard, there is a potential for "collusion through technology."

JEL-codes: K21 L13 L14 L15 O33 (search for similar items in EconPapers)
Date: 2005-08
New Economics Papers: this item is included in nep-cul, nep-law, nep-mic and nep-reg
Note: LE PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.nber.org/papers/w11532.pdf (application/pdf)

Related works:
Working Paper: Digital Rights Management and the Pricing of Digital Products (2005)
Working Paper: Digital Rights Management and the Pricing of Digital Products (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:11532

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w11532

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().