Price discrimination of digital content

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Abstract

This paper considers the simplest DRM, which permits either free or no copying, with incomplete information about the type of consumer. We first obtain results concerning separability of consumers in a general situation, and show that there is a critical type of consumer. A higher utility type selects a menu of free copying whereas a lower one chooses not to copy. In a two-type model we indicate that optimal pricing for a producer is different from that under two-part tariffs. This price strategy brings about greater profits and social welfare if, and only if, self-production is more efficient than that of a producer.

Original languageEnglish
Pages (from-to)421-426
Number of pages6
JournalEconomics Letters
Volume93
Issue number3
DOIs
Publication statusPublished - 2006 Dec

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Keywords

  • Copying
  • Digital rights management
  • Incomplete information
  • Price discrimination
  • Two-part tariff

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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