Journal Archive

Home > Journal Archive
Cover Image
  • P-ISSN 2586-2995
  • E-ISSN 2586-4130

KDI Journal of Economic Policy. Vol. 39, No. 1, March 2017, pp. 83-102

× KDI Open Access is a program of fully open access journals to facilitate the widest possible dissemination of high-quality research. All research articles published in KDI JEP are immediately, permanently and freely available online for everyone to read, download and share in terms of the Creative Commons Attribution 4.0 International License.

Copyright Royalty Regulation and Competition in the Music Retail Market

Yong Hyeon Yang

Author & Article History

Manuscript received 30 September 2016; revision received 06 October 2016; accepted 13 December 2016.


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.


Price Control, Copyright Royalty, Royalty Regulation, Ad valorem Rule, Perunit Rule, Combination Rule, Online Music Service Industry

JEL Code

D43, L43, L51

상단으로 이동