Dirk Bergemann () (Cowles Foundation, Yale University) Thomas Eisenbach () (Dept. of Economics, University of Munich) Joan Feigenbaum () (Dept. of Computer Science, Yale University) Scott Shenker (ICSI and Dept. of Electrical Engineering and Computer Science, University of California, Berkeley)
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We consider the optimal design of flexible use in a digital-rights-management policy. The basic model considers a single distributor of digital goods and a continuum of consumers. Each consumer can acquire the digital good either as a licensed product or an unlicensed copy. The availability of (or access to) unlicensed copies is increasing both in the number of licensed copies and in the flexibility accorded to licensed copies. We thus analyze the optimal design of flexibility in the presence of unlicensed distribution channels (the "greynet"). We augment the basic model by introducing a “secure platform” that is required to use the digital good. We compare the optimal design of flexibility in the presence of a platform to the one without a platform. Finally, we analyze the equilibrium provision when platform and content are complimentary goods but are distributed and priced by different sellers.
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Find related papers by JEL classification: C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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