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Efficient Contracts for Digital Content

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  • Tobias Regner

Abstract

This paper analyses efficient contracts for digital content, focusing on the music industry. It contributes to the quest for an efficient intellectual property rights environment for information goods. Moreover, it adds an interesting application to the field of behavioural economics. The model is set in a contract theory framework with the copyright holder being the principal and a consumer the agent. We offer three contract cases for analysis: strong copy protection, a strategically low price and voluntary reciprocal contributions. Insights from the economics of information and behavioural economics - information goods have public goods properties; social preferences are significant among individuals - are applied to examine the value of a strict copyright enforcement in the digital age. We find that endogenous incomplete contracts based on fair, reciprocal behaviour may achieve a first-best allocation of information goods, while complete contracts are limited to second-best results.

Suggested Citation

  • Tobias Regner, 2004. "Efficient Contracts for Digital Content," The Centre for Market and Public Organisation 04/108, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:04/108
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    File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp108.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    internet; music industry; social preferences; reciprocity; moral hazard; file sharing;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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