Price Discrimination and Copyright Law: Evidence from the Introduction of Dvds
52 Pages Posted: 16 Dec 2004
Date Written: December 2004
This paper examines the welfare effects of intellectual property protection, accounting for firms' optimal responses to legal environments. I examine firms' use of indirect price discrimination in response to U.S. copyright law preventing direct price discrimination. Using data covering VHS and DVD movie distribution, I explain studios' optimal pricing strategies under U.S. copyright law, and determine optimal pricing strategies under E.U. copyright law, which allows for direct price discrimination. I find that studios' use of indirect price discrimination benefits consumers and harms retailers.
Optimal pricing under E.U. copyright law further benefits studios and consumers. I also reanalyze these issues assuming continued DVD adoption.
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