The Resale Royalty Right and its Economic Effects

Abstract

We investigate, by using a 2 period model, the effects of the resale royalty right, also known as the droit de suite or the follower-up right, on an artist, consumers and the society as a whole. We consider two cases separately, depending upon whether the artist behaves as a price taker or a price setter. In both cases, for the artist, the profit in period 1 decreases, but in period it 2 increases and the life time profit increases. However, in case of price taker, the output decreases in both periods. In case of price setter the output in period 1 increases, but in period 2 it decreases and the total output decreases. In case of price taker, consumer surplus decreases in both period, but in case of price setter consumer surplus increases in period 1, but in period 2 it decreases so that the total consumer surplus decreases. In both cases, social welfare decreases.