Tuesday, November 16, 2004

DRM & Digital Pricing

Something of a follow-up to yesterday's posting, the economic analysis of DRMs continues: Digital Rights Management and the Pricing of Digital Products by Yooki Park and Suzanne Scotchmer has been posted on SSRN. It gives little attention to the welfare issues Paul Petrick's paper underlined, as far as I could decipher. It has as its main conclusion that "technical protections can reduce prices for for digital content". The feasibility of DRMs aside, price reduction is something consumers may more than expect for content that is less valuable to them because of usage restrictions. Much on the costs of circumvention and the price dependency of content on the use of shared or individual protection systems. Here's the abstract:
Digital products such as movies, music and computer software are protected both by self-help measures such as encryption and copy controls, and by the legal right to prevent copying. We explore how digital rights management and other technical protections affect the pricing of content, and consequently, why content users, content vendors, and antitrust authorities might have different views on what technical capabilities should be deployed. We discuss the potential for "collusion through technology."


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