Quantifying the Impacts of Digital Rights Management and E-Book Pricing on the E-Book Reader Market

Jin-Hyuk Kim () and Tin Cheuk Leung ()

No 13-03, Working Papers from NET Institute

Abstract: The demand for electronic books (e-books) and the e-book readers are complementary. On the one hand, the emergence of e-book readers such as Amazon's Kindle has triggered the recent growth of the e-book market. On the other hand, several issues in the e-book market can affect the future of the e-book reader market. Considering this complementarity, this paper quantifies the impact of digital rights management (DRM) and discounted e-book pricing on the demand for e-book readers. We collect conjoint survey data to estimate a random coefficient demand model using a hierarchical Bayesian method. Our counterfactual experiments suggest two things. First, Kindle's and Nook's market shares would increase by dropping DRM. Consumer welfare would increase seven percent if all e-book readers dropped DRM. Second, an increase in e-book prices would increase iPad's market share at the expense of that of Kindle and Nook. Consumer welfare would decrease 6 to 10 percent if Kindle's and Nook's e-book prices went up by 50 percent.

Keywords: electronic book; demand estimation; DRM; agency model (search for similar items in EconPapers)
JEL-codes: L15 L63 O30 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2013-09
New Economics Papers: this item is included in nep-com, nep-cul, nep-ict, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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