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Fairness Ex Ante & Ex Post – An Experimental Test of the German “Bestseller Paragraph”

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  • Christoph Engel

    (Max Planck Institute for Research on Collective Goods, Bonn)

  • Michael Kurschilgen

    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

The market for copyrights is characterised by a highly skewed distribution of profits: very few movies, books and songs generate huge profits, whereas the great bulk barely manages to recover production cost. At the moment when the owner of intellectual property grants a licence (“ex ante”), neither party knows the true value of the traded commodity. A seemingly odd provision from German copyright law, the so-called “bestseller paragraph”, stipulates that the seller of a licence has a legally enforceable right to a bonus in case the work (“ex post”) turns out a blockbuster. We experimentally explore the effect of the provision on market prices, on the number of deals struck and on perceived fairness. Our results show that the provision leads to lower prices for copyrights. More copyrights trade. The buyers express less ex-post discontent.

Suggested Citation

  • Christoph Engel & Michael Kurschilgen, 2010. "Fairness Ex Ante & Ex Post – An Experimental Test of the German “Bestseller Paragraph”," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2010_29, Max Planck Institute for Research on Collective Goods, revised Nov 2010.
    • Handle: RePEc:mpg:wpaper:2010_29
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    References listed on IDEAS

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    Keywords

    Copyrights; Fairness; Experiment;
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