Dynamic Analysis of an Institutional Conflict: Copyright Owners Against Online File Sharing

Abstract

Peer-to-peer technology has made massive unsanctioned music exchange possible, which may have a profound effect on the recording industry. Record labels have responded to the emergence of online music networks with litigation and are also considering self-help measures. It is currently not obvious whether or not these strategies will ultimately stifle online file sharing in the long term. With this paper we attempt to add to our understanding of the conflict within the institution that is the commercial music industry. We conduct an institutional analysis of the industry in transition and extend the traditional pattern modeling methodology with a formal resource-based model of a representative online music network. The model accounts for complex causal interactions between resources, private provision of common goods, free riding and membership dynamics. In a series of experiments that emulate the offensive against music networks we show that a peer-to-peer system may be quite resilient to outside disturbances. The experiments also demonstrate that policies rank differently in their effectiveness based on a selected yardstick.

Keywords: Institutional economics, digital music, copyright, peer-to-peer, P2P

JEL Classification: K42, L82, L86, L96, O34, C63, C61