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Price Discrimination, Copyright Law, and Technological Innovation: Evidence From The Introduction of DVDs

  • Mortimer, Julie Holland

U. S. copyright law effectively prevents direct price discrimination for copyright holders that sell to different markets. In response, these firms can engage in indirect price discrimination. I derive theoretical predictions about the use of indirect price discrimination, and I analyze how optimal pricing strategies differ for different products. Using data on VHS and DVD movie distribution, I find that firms' pricing choices are consistent with the predictions of theory and that firms' use of indirect price discrimination benefits consumers (but harms ancillary retailers). Finally, I examine what optimal pricing strategies might look like in a legal environment that permits direct price discrimination.

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Paper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3425914.

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Date of creation: 2007
Date of revision:
Publication status: Published in Quarterly Journal of Economics -Cambridge Massachusetts-
Handle: RePEc:hrv:faseco:3425914
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Web page: http://www.economics.harvard.edu/

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