Digital Rights Management and Technological Tying
43 Pages Posted: 19 Oct 2008
Date Written: September 27, 2008
Abstract
This paper analyzes DRM-based technological tying, where the content and hardware form a system. A closed DRM system makes the legal content incompatible with a rival's hardware, whose users must then obtain illegal copies. The main finding is that the tying firm gains market power in a competitive hardware market and invests in product upgrades at a later stage. Welfare implications of the policy that requires an open DRM system are also discussed.
Keywords: digital rights management, copying, tying
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