Quantifying the Impacts of Digital Rights Management and E-Book Pricing on the E-Book Reader Market
AbstractThe demand for electronic books (e-books) and the e-book readers are complementary. On the one hand, the emergence of e-book readers such as Amazon's Kindle has triggered the recent growth of the e-book market. On the other hand, several issues in the e-book market can affect the future of the e-book reader market. Considering this complementarity, this paper quantifies the impact of digital rights management (DRM) and discounted e-book pricing on the demand for e-book readers. We collect conjoint survey data to estimate a random coefficient demand model using a hierarchical Bayesian method. Our counterfactual experiments suggest two things. First, Kindle's and Nook's market shares would increase by dropping DRM. Consumer welfare would increase seven percent if all e-book readers dropped DRM. Second, an increase in e-book prices would increase iPad's market share at the expense of that of Kindle and Nook. Consumer welfare would decrease 6 to 10 percent if Kindle's and Nook's e-book prices went up by 50 percent.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 13-03.
Length: 42 pages
Date of creation: Sep 2013
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electronic book; demand estimation; DRM; agency model;
Find related papers by JEL classification:
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-18 (All new papers)
- NEP-COM-2013-10-18 (Industrial Competition)
- NEP-CUL-2013-10-18 (Cultural Economics)
- NEP-ICT-2013-10-18 (Information & Communication Technologies)
- NEP-IND-2013-10-18 (Industrial Organization)
- NEP-MKT-2013-10-18 (Marketing)
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