Author(s)
Jin-Hyuk Kim
Source
NET Institute Working Paper #08-05, September 2008
Summary
This paper studies whether Digital Rights Management (DRM) tying has the effect of gaining market power.
Policy Relevance
This paper is relevant to policy regarding anti-competition and monopolization problems within the tech industry.
Main Points
- In a market of competitive hardware devices, the firm that owns a proprietary DRM technology can monopolize the market by tying the protected legal content to its hardware.
- In line with previous literature on tying, the findings of this paper are that hardware firms that own DRM technology have an incentive to tie the legal content to their hardware based on their DRM technology. This increases the tying company’s profits above the competitive level because users of the rival’s hardware must obtain illegal copies, which is costly when the content is DRM protected.
- More work needs to be done before using antitrust to attack this type of technology based tying.
