Nonrivalry and Price Discrimination in Copyright Economics
John P. Conley
Vanderbilt University - College of Arts and Science - Department of Economics
Christopher S. Yoo
University of Pennsylvania Law School; University of Pennsylvania - Annenberg School for Communication; University of Pennsylvania - School of Engineering and Applied Science
University of Pennsylvania Law Review, Vol. 157, Pg. 1801, July 2009
U of Penn, Inst for Law & Econ Research Paper No. 09-17
U of Penn Law School, Public Law Research Paper No. 09-13
The literature on the economics of copyright proceeds from the premise that copyrightable works constitute pure public goods, which is generally modeled by assuming that such works are nonexcludable and that the marginal cost of making additional copies is essentially zero. A close examination of the foundational literature on public goods theory reveals that the defining characteristic of public goods is instead the optimality criterion known as the “Samuelson condition,” which implies that the systematic bias toward underproduction is the result of the inability to induce consumers to reveal their preferences rather than the inability to exclude or price at marginal cost. Reframing the analysis in terms of the Samuelson condition also contradicts the hostility toward price discrimination reflected in much of the literature by implying that price discrimination is a necessary condition for optimality. At the same time, it implies that the producer need only appropriate the marginal benefits created by the public good, which in turn provides a basis for determining an optimal level of price discrimination that still permits consumers to retain some of the surplus. Moreover, broadening public good models to reflect the fact that copyrighted works often serve as imperfect substitutes for one another allows the number of works to be determined endogenously. In such impure public goods models, the systematic bias toward underproduction disappears, and price discrimination once again may (but need not necessarily) promote optimality.
Number of Pages in PDF File: 31
Keywords: intellectual property, public goods, Samuelson condition, access-incentives tradeoff, hedonic characteristics, spatial competition
JEL Classification: H42, K39Accepted Paper Series
Date posted: May 21, 2009 ; Last revised: August 24, 2009
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.531 seconds