Open Access Journal Article

Protection in DRM and pricing strategies for digital products considering quality degradation

by Linlan Zhang a,* orcid  and  Yu Zhang a
a
School of Business, Hubei University, Wuhan, China
*
Author to whom correspondence should be addressed.
EAL  2023, 13; 2(1), 13; https://doi.org/10.58567/eal02010003
Received: 16 February 2023 / Accepted: 8 March 2023 / Published Online: 21 March 2023
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Abstract

In this paper, we develop a model in which a monopolistic firm manufactures and sells a digital product, by incorporating digital rights management (DRM), quality degradation of pirated products, and government copyright enforcement into the consumer’s utility function. We determine the monopolist’s optimal pricing strategies and the appropriate DRM protection level through mathematical deduction. Our results show that when the government copyright enforcement is moderate and the quality of pirated products is relatively high, implementing a DRM system is optimal for the monopolist. However, in most other cases, DRM-free is better for the monopolist. This result may explain why DRM is not very popular in some industries. Our results suggest that choosing the right price, focusing on content innovation, and weakening DRM protection may be a better strategy for firms now. The results also indicate that DRM-free may be more prominent in the digital music industry than in the software and video games industries.

Keywords: Pricing; DRM-free; Digital piracy; Quality degradation;
Copyright: © 2023 by Zhang and Zhang. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
Zhang, L.; Zhang, Y. Protection in DRM and pricing strategies for digital products considering quality degradation. Economic Analysis Letters, 2023, 2, 13. https://doi.org/10.58567/eal02010003
AMA Style
Zhang L, Zhang Y. Protection in DRM and pricing strategies for digital products considering quality degradation. Economic Analysis Letters; 2023, 2(1):13. https://doi.org/10.58567/eal02010003
Chicago/Turabian Style
Zhang, Linlan; Zhang, Yu 2023. "Protection in DRM and pricing strategies for digital products considering quality degradation" Economic Analysis Letters 2, no.1:13. https://doi.org/10.58567/eal02010003
APA style
Zhang, L., & Zhang, Y. (2023). Protection in DRM and pricing strategies for digital products considering quality degradation. Economic Analysis Letters, 2(1), 13. https://doi.org/10.58567/eal02010003

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