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Quantifying the Impacts of Digital Rights Management and E-Book Pricing on the E-Book Reader Market

Author

Listed:
  • Jin-Hyuk Kim

    () (Department of Economics, University of Colorado at Boulder)

  • Tin Cheuk Leung

    () (Department of Economics, Chinese University of Hong Kong)

Abstract

The 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.

Suggested Citation

  • 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.
  • Handle: RePEc:net:wpaper:1303
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    References listed on IDEAS

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    Cited by:

    1. repec:kap:qmktec:v:15:y:2017:i:2:d:10.1007_s11129-017-9183-z is not listed on IDEAS
    2. Babur De los Santos & Matthijs Wildenbeest, 2014. "E-book Pricing and Vertical Restraints," Working Papers 14-18, NET Institute.

    More about this item

    Keywords

    electronic book; demand estimation; DRM; agency model;

    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, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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