Shared Information Goods
New York University (NYU) - Department of Information, Operations, and Management Sciences
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)
University of California, Los Angeles (UCLA) - School of Law
University of Chicago Law School, John M. Olin Law & Economics Working Paper No. 67
Once purchased, information goods are often shared among groups of consumers. Computer software, for example, can be duplicated and passed from one user to the next. Journal articles can be copied. Music can be dubbed. In this paper, we ask whether these various forms of sharing undermine seller profit. We compare profitability under the assumption that information goods are used only by their direct purchasers, with profitability under the more realistic assumption that information goods are sometimes shared within small social communities. We reach several surprising conclusions. We find, for example, that under certain circumstances sharing will markedly increase profit even if sharing is inefficient in the sense that it is more expensive for consumers to distribute the good via sharing than it would be for the producer to simply produce additional units. Conversely, we find that sharing can markedly decrease profit even where sharing reduces net distribution costs. These results contrast with much of the prior literature on small-scale sharing, but are consistent with results obtained in related work on the topic of commodity bundling.
Number of Pages in PDF File: 42
JEL Classification: L86working papers series
Date posted: October 8, 1998
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