The Digital Dilemma Intellectual Property in the Information Age (2000) / Chapter Skim
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Appendix D: Information Economics: A Primer
Appendix D: Information Economics: A Primer
Pages 271-281
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From page 271... ...
that identify a product, company, or organization to others. For the purposes of economic analysis, the narrower and more precise definitions of information that are used in other disciplines notably computer science and mathematical statistics do not provide economically meaningful distinctions and, therefore, are not addressed here.
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From page 272... ...
In the case of live theatrical performances or broadcasts, the product need only be produced once but is simultaneously delivered to everyone in the audience. For theatrical performances, the duplication and delivery costs consist of the rental cost of the theater facilities and the salaries of nonperforming theater personnel.
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From page 273... ...
, most participants in the business of information creation expect compensation. They will not produce new information products unless the amount of compensation is sufficient to justify spending time and resources in this endeavor.
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From page 274... ...
Economically efficient production requires that everyone be allowed to buy the product who is willing to pay at least the social cost of providing his or her copy. Thus, a fundamental property of a royalty-based system of paying for the creation of new information products is that these products will be fin some cases, advertising itself can be a product.
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From page 275... ...
Taxes (such as sales, income, and property) are like royalties in that they drive a wedge between the social value of the taxed item and its market price, thereby discouraging the taxed activity and creating a loss of economic efficiency.
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From page 276... ...
To the extent that people within these categories differ in the value they place on the product, the problems discussed in this section will arise within the groups. A second impediment to implementing extensive price discrimination is that sellers often cannot prevent arbitrage that is, the circumstance in which the buyer who places a low value on the product simply resells it to the buyer who values it highly.
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From page 277... ...
Finally, the ancillary product solution is better than the royalty approach but worse than the grants approach on grounds of economically efficient distribution, but is better than the grants approach and worse than the royalty approach when it comes to selecting the products that users want for production.4 THE ROLE OF INTELLECTUAL PROPERTY Intellectual property is the area of law and policy that determines the solution to the trade-off between fostering incentives to create new information and diffusing its benefits throughout society. Intellectual property law inevitably is a two-edged sword in that it both grants and, simultaneously, limits the rights of the producer of new information in order to articulate how this trade-off will be made.
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From page 278... ...
Department of Justice, the government argued that Microsoft had used its monopoly power in operating systems for personal computers to disadvantage competitors in applications software, such as Internet browsers, in part to monopolize these markets as well and in part to prevent other browsers and office applications suites from becoming integrated products that would threaten Microsoft's operating system monopoly. Regardless of the merits of
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From page 279... ...
The reason is that changes in IP rights are infrequent and, typically, are limited to a specific type of information, leading to questions about the generality of the lessons learned from any specific case (see the example discussed in Box D.1~. THE ENFORCEMENT ISSUE Socially beneficial systems of intellectual property rights necessarily create costs as well as benefits for the simple reason that such rights are costly to enforce.
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From page 280... ...
Hence, like royalties, these costs drive still another wedge between the price and the social cost of the product and, like royalties, are another source of potential economic inefficiency in the dissemination of the product.
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From page 281... ...
7As a result, popular feature films usually are not released to the videotape market until after their first theatrical run. These releases on videotape have a negligible effect on revenues from theaters and can be profitably priced low enough so that pirates have little incentive to engage in extensive unauthorized commercial copying.
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