This makes sense, but it doesn’t make sense why a content seller would want to prevent someone from a cheaper market from appearing to be from a more expensive market. If the subscriber is paying the higher price because they are pretending to be from that country, why wouldn’t they just let them? I can see trying to stop the reverse, but not that.
One classic example from microeconomics textbooks is child/adult admission tickets for cinemas. The cost to provide the service (and the constraints on capacity) are the same for both types of ticket. But children have less money than adults (in general) and it's easy to stop an adult posing as a child (by checking ID).
The Netflix example is more complicated, as there are transactions happening at two levels:
* studios are selling content to distributors in different markets
* Netflix is selling subscriptions to consumers in different markets
Also, unlike the single-event case at the top of my post, the service being provided isn't identical for all buyers. Folks in the UK don't get the same bundle of shows as folks in the US.
Even if folks in the UK pay more, that doesn't mean Netflix is OK with them watching all the shows that are available to Netflix US subscribers. Because the creators of those shows sold the UK rights to a different company (e.g. Sky TV) that was willing to pay more than Netflix.
Netflix doesn't care about this directly but, if UK customers bypass the restrictions at too large a scale, the creators/studios won't be willing to sell rights to Netflix in future. Because, by selling rights to Netflix for the US, they reduce the value of the rights they sell to Sky in UK.
