Digital Rights Management and the Pricing of Digital Products

37 Pages Posted: 16 Sep 2005 Last revised: 7 Jul 2022

See all articles by Yooki Park

Yooki Park

University of California, Berkeley - Department of Economics

Suzanne Scotchmer

University of California - Department of Economics (Deceased); University of California, Berkeley - School of Law; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2005

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."

Suggested Citation

Park, Yooki and Scotchmer, Suzanne, Digital Rights Management and the Pricing of Digital Products (August 2005). NBER Working Paper No. w11532, Available at SSRN: https://ssrn.com/abstract=778105

Yooki Park

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://www.ocf.berkeley.edu/~yooki/

Suzanne Scotchmer (Contact Author)

University of California - Department of Economics (Deceased)

Berkeley, CA 94720-3880
United States

University of California, Berkeley - School of Law

215 Boalt Hall
Berkeley, CA 94720-7200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
61
Abstract Views
1,410
Rank
162,419
PlumX Metrics