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Flexibility as an Instrument in Digital Rights Management

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Dirk Bergemann & Thomas Eisenbach & Joan Feigenbaum & Scott Shenker, 2005. "Flexibility as an Instrument in Digital Rights Management," Cowles Foundation Discussion Papers 1505, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:1505
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    File URL: http://cowles.yale.edu/sites/default/files/files/pub/d15/d1505.pdf
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    References listed on IDEAS

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    1. Rob, Rafael & Waldfogel, Joel, 2006. "Piracy on the High C's: Music Downloading, Sales Displacement, and Social Welfare in a Sample of College Students," Journal of Law and Economics, University of Chicago Press, vol. 49(1), pages 29-62, April.
    2. Takeyama, Lisa N, 1994. "The Welfare Implications of Unauthorized Reproduction of Intellectual Property in the Presence of Demand Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 155-166, June.
    3. Kathleen Reavis Conner & Richard P. Rumelt, 1991. "Software Piracy: An Analysis of Protection Strategies," Management Science, INFORMS, vol. 37(2), pages 125-139, February.
    4. Novos, Ian E & Waldman, Michael, 1984. "The Effects of Increased Copyright Protection: An Analytic Approach," Journal of Political Economy, University of Chicago Press, vol. 92(2), pages 236-246, April.
    5. Bakos, Yannis & Brynjolfsson, Erik & Lichtman, Douglas, 1999. "Shared Information Goods," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 117-155, April.
    6. Arun Sundararajan, 2003. "Managing Digital Piracy: Pricing, Protection and Welfare," Law and Economics 0307001, EconWPA.
    7. Peter Biddle & Paul England & Marcus Peinado & Bryan Willman, 2003. "The Darknet and the Future of Content Distribution," Levine's Working Paper Archive 618897000000000636, David K. Levine.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Jin-Hyuk Kim, 2008. "Digital Rights Management and Technological Tying," Working Papers 08-05, NET Institute, revised Sep 2008.
    2. David Waterman & Sung Ji & Laura Rochet, 2007. "Enforcement and Control of Piracy, Copying, and Sharing in the Movie Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(4), pages 255-289, June.

    More about this item

    Keywords

    Digital Rights Management; Platform; Flexibility; Piracy;

    JEL classification:

    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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