Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200804 
Year of Publication: 
2017
Citation: 
[Journal:] KDI Journal of Economic Policy [ISSN:] 2586-4130 [Volume:] 39 [Issue:] 1 [Publisher:] Korea Development Institute (KDI) [Place:] Sejong [Year:] 2017 [Pages:] 83-102
Publisher: 
Korea Development Institute (KDI), Sejong
Abstract: 
Price control can restore efficiency in some cases, but an uncarefully designed policy fails to restore efficiency, yields side effects, or even exacerbates efficiency losses. This paper shows that the copyright royalty rule, which takes the greater of ad valorem royalties and perunit royalties, tends to fix the prices of final goods at a specific level. Such a rule weakens competition as it prevents prices from decreasing even when market conditions change, having negative effects on social welfare as well as consumer surplus. Counterfactual analyses using estimation results in the Korean online music service industry show that firms could have profitably reduced prices if the ad valorem rule had been applied instead, although they did not have an incentive to do so under the original combination rule.
Subjects: 
Price Control
Copyright Royalty
Royalty Regulation
Ad valorem Rule
Per-unit Rule
Combination Rule
Online Music Service Industry
JEL: 
D43
L43
L51
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-sa Logo
Document Type: 
Article

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