A Resource-Based Analysis of Peer-to-Peer Technology

Abstract

Peer-to-peer technology allowed massive free music file sharing, which led to much controversy, legal debate, and a great deal of speculation about technology's business viability. Operation of a peer-to-peer (P2P) network depends on the content and bandwidth contributions from its users.

Many users free ride by contributing fewer resources than they use. Research found that free riding intensifies with crowding. These salient features suggest that the underlying template describing a P2P system may be the limits to growth archetype. We expand on this idea by building a system dynamics model, which captures complex causal interactions between private provision of common resources, free riding, network performance, and membership dynamics. Base runs confirm that the model reproduces historically observed behavior. We use the calibrated model to test effectiveness of certain modifications that have been proposed for real P2P networks. Simulation results are explained by reviewing the interplay of reinforcing and limiting feedbacks that drive the system.

Keywords: copyright, recorded music, Internet, Peer-to-peer, P2P, free riding, online file sharing, system dynamics

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