Efficient Contracts for Digital Content

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Efficient Contracts for Digital Content

Author Info

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.

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Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 04/108.

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Length: 30 pages
Date of creation: Jul 2004
Date of revision:
Handle: RePEc:bri:cmpowp:04/108

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
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

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-10-18 (All new papers)
NEP-REG-2004-10-18 (Regulation)

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Fahr, Rene & Irlenbusch, Bernd, 2000. "Fairness as a constraint on trust in reciprocity: earned property rights in a reciprocal exchange experiment," Economics Letters, Elsevier, vol. 66(3), pages 275-282, March. [Downloadable!] (restricted)
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Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March. [Downloadable!] (restricted)
Besen, Stanley M & Kirby, Sheila Nataraj, 1989. "Private Copying, Appropriability, and Optimal Copying Royalties," Journal of Law & Economics, University of Chicago Press, vol. 32(2), pages 255-80, October.

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