This paper presents an audio codec for multiple, i.e. cascaded, lossy compression without degeneration of perceptual quality. The coding scheme is based on a previously reported psychoacoustic embedding strategy, which allows transfer of encoding information to all subsequent codecs in a cascade. A new dynamic embedding scheme has been developed, which allows an optimal exploitation of a signal's perceptual embedding capacity. As opposed to previous methods, the authors' approach allows one to overcome embedding capacity problems and possible signal distortions. Moreover, it allows the realization of a new embedding strategy, which guarantees the perfect reconstruction of the first-generation signal after an arbitrary number of encoding and decoding steps. In the presented MPEG-1-based codec implementations, the dynamic embedding scheme was realized by a specific bit reservoir technique.:
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