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Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs

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Julie Holland Mortimer
Abstract

This paper examines the welfare effects of intellectual property protection, accounting for firms' optimal responses to legal environments and technological innovation. I examine firms' use of indirect price discrimination in response to U.S. copyright law, which effectively prevents direct price discrimination. Using data covering VHS and DVD movie distribution, I explain studios' optimal pricing strategies under U.S. copyright law, and determine optimal pricing strategies under E.U. copyright law, which allows for direct price discrimination. I analyze these optimal pricing strategies for both the existing VHS technology and the new digital DVD technology. I find that studios' use of indirect price discrimination under US copyright law benefits consumers and harms retailers. Optimal pricing under E.U. copyright law also tends to benefit studios and consumers. I also reanalyze these issues assuming continued DVD adoption.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11676.

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Date of creation: Oct 2005
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Handle: RePEc:nbr:nberwo:11676

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L0 - Industrial Organization - - General
O3 - Economic Development, Technological Change, and Growth - - Technological Change

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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.:
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Cited by:
(explanations, 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.)

  1. Lesley Chiou, 2005. "The Timing of Movie Releases: Evidence from the Home Video Industry," Occidental Economics Working Papers 4, Occidental College, Department of Economics, revised Jul 2006. [Downloadable!]
  2. Ivan Png, 2006. "Copyright: A Plea for Empirical Research," Levine's Working Paper Archive 321307000000000484, David K. Levine. [Downloadable!]
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