Copyright and Product Differentiation
70 Pages Posted: 22 Oct 2003
Existing analyses of the economics of copyright have largely overlooked the implications of the somewhat unusual economics of product differentiation. The omission is unfortunate, because adoption of a differentiated products approach yields significant insights that the current theories cannot provide. First, the differentiated products approach offers a better account for many features of real-world markets for copyrighted works. Second, it reveals that nonrivalry in consumption - widely regarded as the distinguishing economic feature of copyright - may not play as central role in the analysis as generally believed. Third, it reveals that the supposed tension between providing access to creative works and providing sufficient incentives to support their creation may not be as irreconcilable as generally believed. Instead, it shows how both considerations can be promoted simultaneously by facilitating entry by close substitutes for existing works. This approach contradicts the conventional wisdom, which holds that copyright protection should be kept to the lowest possible level that still permits creation of the works in question, and instead suggests that both sides of the access-incentives tradeoff can be promoted by strengthening some (but not all) aspects of copyright protection. Fourth, it allows for a more nuanced approach to copyright that can isolate the effect of three different ways in which copyright protection can be strengthened or weakened. This contrasts starkly with the current approach, which lumps all aspects of copyright protection into a single variable.
Suggested Citation: Suggested Citation