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Shared Information Goods

University of Chicago Law School, John M. Olin Law & Economics Working Paper No. 67

42 Pages Posted: 8 Oct 1998  

Yannis Bakos

New York University (NYU) - Department of Information, Operations, and Management Sciences

Erik Brynjolfsson

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Douglas Lichtman

University of California, Los Angeles (UCLA) - School of Law

Date Written: February 1999

Abstract

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.

JEL Classification: L86

Suggested Citation

Bakos, Yannis and Brynjolfsson, Erik and Lichtman, Douglas, Shared Information Goods (February 1999). University of Chicago Law School, John M. Olin Law & Economics Working Paper No. 67. Available at SSRN: https://ssrn.com/abstract=130904 or http://dx.doi.org/10.2139/ssrn.130904

Yannis Bakos

New York University (NYU) - Department of Information, Operations, and Management Sciences ( email )

44 West Fourth Street
New York, NY 10012
United States
212-998-0841 (Phone)

HOME PAGE: http://www.stern.nyu.edu/~bakos

Erik Brynjolfsson

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E53-313
Cambridge, MA 02142
United States
617-253-4319 (Phone)

HOME PAGE: http://digital.mit.edu/erik

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Douglas Gary Lichtman (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
310-267-4617 (Phone)

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