Copyright and Generic Entry in Book Publishing

Abstract

Copyright affects the distribution of creative content. Taking works off copyright promotes their availability, which benefits consumers. But it also allows generic entry to dissipate producer surplus. This paper examines the effect of a copyright on the availability and price of books when incentives to create new works are not affected. I evaluate the welfare impact of the 1998 Sonny Bono Copyright Extension Act by estimating differences in consumer and producer surplus across a range of affected works under copyright protection and in the public domain. Using a regression discontinuity analysis, I find that a copyright significantly limits the availability of works. In a demand and entry model, I find that this leads to decreases in consumer surplus which are more than four times as large as any increases in profits to copyright holders and publishers. Without changing incentives to create new ideas, the copyright extension was economically inefficient.

Keywords: Intellectual property, copyright extension, generic entry, regression discontinuity, discrete choice demand, consumer surplus

JEL Classification: L17, L43, O3