Pricing under the Threat of Piracy: Flexibility and Platforms for Digital Goods
AbstractWe consider the optimal design of flexible use in a digital-rights-management policy for a digital good subject to piracy. Consumers can acquire the digital good either as a licensed product or as an unlicensed copy. The ease of access to unlicensed copies is increasing in the flexibility accorded to licensed copies. The content provider has to trade off consumers' valuation of a licensed copy against the sales lost to piracy. We enrich the basic model by introducing a "secure platform" that is required to use the digital good. We show that the platform allows for the socially optimal provision of flexibility for the digital good but only if both are sold by an integrated firm.
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Bibliographic InfoPaper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1834.
Length: 22 pages
Date of creation: Nov 2011
Date of revision:
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-14 (All new papers)
- NEP-CUL-2011-11-14 (Cultural Economics)
- NEP-IPR-2011-11-14 (Intellectual Property Rights)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Liebowitz, S J, 1985. "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 945-57, October.
- Bakos, Yannis & Brynjolfsson, Erik & Lichtman, Douglas, 1999. "Shared Information Goods," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 117-55, April.
- Jin-Hyuk Kim & Tin Cheuk Leung, 2013. "Quantifying the Impacts of Digital Rights Management and E-Book Pricing on the E-Book Reader Market," Working Papers 13-03, NET Institute.
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