TY  - JOUR
AU  - Park,Yooki
AU  - Scotchmer,Suzanne
TI  - Digital Rights Management and the Pricing of Digital Products
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11532
PY  - 2005
Y2  - August 2005
UR  - http://www.nber.org/papers/w11532
L1  - http://www.nber.org/papers/w11532.pdf
N1  - Author contact info:
Yooki Park

Suzanne Scotchmer
Department of Economics
Evans Hall
University of California
Berkeley, CA  94720-3880
Tel: 510/643-8562
Fax: 510/643-9657
E-Mail: scotch@berkeley.edu
M2  - featured in NBER digest on 2005-08-08
AB  - 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."
ER  -