how to best ensure remuneration for creators in the market for music copyright and its alternatives the focus of this essay is to examine the market for copyrighted works with a particular emphasis on the sound recording market this market is currently in a state of flux some would say disarray due to the ability of the internet to lower transmission costs for both authorized and unauthorized copies with the latter being at this time far more prevalent in this essay we discuss the intent of copyright the role of copying and file sharing and some alternative production consumption schemes meant to strengthen or to replace copyright

a note on undominated bertrand equilibria abstract this note shows that the conventional outcome associated with bertrand competition with homogenous products and different marginal costs is obtained in every nash equilibrium in which firms use undominated strategies this strengthens an existence result due to blume 2003

the role of brand image and product characteristics on firms entry and oem decisions we investigate the optimal market entry and original equipment manufacturer oem decisions of a firm facing a market in which firms brands can be horizontally differentiated and products can be vertically differentiated the entrant might sell under its own brand and compete with an incumbent become a supplier to the incumbent or both findings reveal that when consumers perceive the firms are horizontally and vertically differentiated the entrant profits by simultaneously entering the market and establishing an oem arrangement with the incumbent in such competitive scenarios both buyer and seller increase profits by agreeing on wholesale prices that are not too low which softens both horizontal and vertical conflict between the firms findings also show that the incumbent may prefer to pay high wholesale prices to the entrant even if the incumbent had the option to source the product independently at a lower marginal cost when firms have the capability of producing each other s product lines su

price discrimination copyright law and technological innovation evidence from the introduction of dvds u s copyright law effectively prevents direct price discrimination for copyright holders that sell to different markets in response these firms can engage in indirect price discrimination i derive theoretical predictions about the use of indirect price discrimination and i analyze how optimal pricing strategies differ for different products using data on vhs and dvd movie distribution i find that firms pricing choices are consistent with the predictions of theory and that firms use of indirect price discrimination benefits consumers but harms ancillary retailers finally i examine what optimal pricing strategies might look like in a legal environment that permits direct price discrimination

digital content provision and optimal copyright protection advances in digital technologies have led to an increasing concern about piracy for providers of digital content e g e books games music software videos yet controversies exist over the influence of copyright protection on firm profitability the objective of this paper is to provide an alternative rationale for the growing anti protection trend and to investigate optimal copyright enforcement and quality provision in a monopoly setting the proposed economic mechanism centers on the influence of copyright protection on consumer search when consumers can get to know the firm s actions e g price quality only after costly search we show that more stringent copyright protection can induce the consumers to rationally expect lower ex post surplus thus exerting a negative strategic effect on the consumers willingness to search this strategic effect may outweigh the positive main effect on the relative attractiveness of the authorized versus the pirated product which can hence explain the opti

on the nonemptiness of the α core of discontinuous games transferable and nontransferable utilities abstract the nonemptiness of the core of games with continuous payoff functions was proved by scarf 1971 for nontransferable utilities and by zhao 1999 for transferable utilities in this paper we present generalizations of their results to games with possibly discontinuous payoff functions our handling of discontinuity is based on reny s 1999 better reply security concept we present examples to show that our generalizations are nonvacuous

a folk theorem for one shot bertrand games we show that bounded monopoly profits are essential for the uniqueness of the bertrand paradox zero profit outcome otherwise a folk theorem obtains for one shot homogeneous product bertrand games any positive but finite payoff vector can be achieved in a symmetric mixed strategy nash equilibrium

pollution claim settlements under private information abstract the classical problem of resolving a nuisance dispute between a pollution generating firm and nearby residents is modelled here as a mechanism design problem we assume that the designer of the mechanism is the firm that it is uncertain about the actual losses suffered by residents and that the initial assignment of property rights is one where each resident is entitled to prevail we derive a profitmaximizing scheme under the individual rationality and incentive compatibility constraints and examine its properties it is shown that the outcomes it yields are sometimes inefficient moreover when many residents are affected by pollution and the degree of uncertainty with respect to the losses they suffer is large these inefficiencies become rampant

trading volume and asset liquidity since the depth and liquidity of a market depend on the entry decisions of all potential participants each trader assesses them according to conjectures about entry by others if trade is equally costly across markets this externality leads to the concentration of trade on one market if not it can produce multiple conjectural equilibria some where trade concentrates on one market and others where large traders resort to a separate market or to search for a trading partner while fragmentation is welfare reducing in the two market case no such ranking is possible if it involves off exchange search

online content pricing purchase and rental markets digitization of content is changing how consumers and firms use purchase and rental markets low transaction costs make accessing content easier for consumers digital technology enables firms to create nondurable rental versions of their content and to restrict content to the purchasing consumer effectively shutting down resale markets to empirically analyze the interaction of purchase and rental markets i design a preference measurement tool to recover consumers intertemporal preferences through current period choices alone i then use these preferences to solve for a dynamic equilibrium between consumers and the firm in the context of the online home video market i find that when the firm is able to commit to holding prices fixed forever providing content through the purchase market alone is sufficient however when the firm is unable to commit it should serve both purchase and rental markets canonical theory models would predict exclusive rentals but the purchase option enables indirect price discrimination in practice i also find that when consumers place a premium on accessing new content they are less likely to intertemporally substitute thereby increasing the firm s pricing power consistent with theory commitment to future prices increases profits considerably this finding supports the rigid pricing structure of such retailers as apple despite studios push toward more pricing flexibility

bertrand competition when firms hold passive ownership stakes in one another abstract we show that the bertrand oligopoly model with cost asymmetries may admit multiple nash equilibria when firms hold passive ownership stakes in each other the equilibrium price may be as high as the monopoly price of the most efficient firm

supply function competition with asymmetric costs theory and experiment abstract we study a multi unit auction where bidders differ in their marginal costs and compare the outcome to the bertrand or single unit auction analogue

an economic approach to influence activities in organizations members of organizations spend considerable time effort and ingenuity attempting to influence decision makers such influence activities may bring benefits to the organization but they also involve real costs this essay offers an economic rationale for such influence activity as representing rational self interested behavior in the presence of informational asymmetries and an analysis of how the design of the organization s structure and policies should respond to the incentives for attempting influence it is posited that information valuable for the organization s decision making is directly available only to members of the organization who have some personal stake in the decisions these individuals may then have an incentive to try to manipulate the information they develop and provide in order to influence the resulting decisions to their benefits this can be costly both in degrading the quality of decision making and in diverting the attention and effort of the organization s members from more productive activities the organization has three different methods it can employ to discourage excessive influence activities and to encourage more directly productive uses of time and effort it can limit access to decision makers and participation in decision making it can alter its decision making criteria to favor those performing well in productive activities and it can provide direct financial incentives to encourage the desired allocation of effort it is shown that an efficiently designed organization will use such financial incentives only as a last resort instead it will always first alter its decision participation policies and decisionmaking criteria

why there are organized futures markets i shall present an explanation of the existence of organized futures markets with more predictive power than the two prevailing rival views my explanation briefly is this an organized futures market facilitates trade among strangers one of the rival prevailing views is a defense of futures trading it asserts that an organized futures market furnishes legitimate businessmen with a means of hedging so that they can obtain insurance against price risk the other prevailing view is an attack on organized futures markets it asserts that such markets enable speculators to manipulate prices to the detriment of outsiders who are less well informed and to the detriment of legitimate businessmen such as farmers the attack on organized futures markets likens them to gambling casinos the defense sees them as a form of insurance neither the attack nor the defense is valid the correct explanation is closely related to why we conduct trade using money instead of by barter

the intertemporal consequences of unauthorized reproduction of intellectual property in an intertemporal framework the harm to firms from unauthorized reproduction of their products may be significantly greater than that predicted by most static models copying by some consumers reduces the appropriable surplus from all consumers including those consumers lacking any propensity to copy somewhat paradoxically however the commitment value of copies may also imply that profits are higher with copying than without copying it is therefore suggested that firms may prefer differential copyright enforcement and that the commitment value of copies may offer a strategic explanation for free giveaways of abridged versions of intellectual property and vertical product differentiation more generally

commercial piracy and intellectual property policy abstract i discuss the competition between a copyright owner and several commercial pirates who sell copies of the same information good to consumers i view the increased risk of a punishment that offering a pirate copy to a consumer causes as an advertising cost whose value is chosen by the government the structure of the market for pirate copies is affected also by fixed costs that are caused by punishments or drm systems i present a systematic analysis of the effects of these policy variables and the quality of pirate copies on the market for the considered information good

fighting software piracy which governance tools matter in africa this article integrates previously missing components of government quality into the governance piracy nexus in exploring governance mechanisms by which global obligations for the treatment of iprs are effectively transmitted from international to the national level in the battle against piracy it assesses the best governance tools in the fight against piracy and upholding of intellectual property rights iprs the instrumentality of ipr laws treaties in tackling piracy through good governance mechanisms is also examined findings demonstrate that 1 while all governance tools under consideration significantly decrease the incidence of piracy corruption control is the most effective weapon 2 but for voice and accountability political stability and democracy ipr laws treaties are instrumental in tackling piracy through government quality dynamics of rule of law regulation quality government effectiveness corruption control and press freedom hence the need for a policy approach most conducive to expanding development is to implement an integrated system of both iprs and corollary good governance policies moreover our findings support the relevance of good governance measures in developing countries wishing to complement their emerging ipr regimes

revenue sharing and vertical control in the video rental industry revenue sharing contracts in which retailers pay a royalty on sales to their suppliers are now widely used in the video rental industry we show that revenue sharing is valuable in vertically separated industries in which demand is either stochastic unpredictable or variable e g systematically declining downstream inventory is chosen before demand is realized and downstream firms engage in intrabrand competition unlike two part tariffs revenue sharing achieves the first best outcome by softening retail price competition without distorting retailers inventory decisions our theories are also consistent with trends in prices and availability following retailers adoption of revenue sharing contracts

can position limits restrain rogue trading this paper studies the imposition of position limits on commodity futures from the perspective of curbing excessive speculation and thus manipulation we present a simple general equilibrium model in a static rational expectations framework and agent heterogeneity to illustrate that excessive speculation serves to enrich other agents at the expense of the speculator position limits on the contrary are not only superfluous but also counter productive as they exacerbate market power and lead to a deterioration in efficiency position limits not only reduce social welfare but also cannot restrain market manipulation

buying sharing and renting information goods information goods such as books journals computer software music and videos can be copied shared resold or rented when such opportunities for sharing are present the content producer will generally sell a smaller amount at a higher price which may increase or decrease profits i identify three circumstances where profits increase 1 when the transactions cost of sharing is less than the marginal cost of production 2 when content is viewed only a few times and transactions costs of sharing are low and 3 when a sharing market provides a way to segment high value and low value users

bertrand competition with cost uncertainty abstract we analyze the classical model of bertrand competition in a homogeneous good market with constant marginal costs and uncertainty regarding rivals costs first we show that there exists a mixed strategy nash equilibrium under the conventional equal sharing rule second we illustrate the result for the case of piecewise affine market demand

bertrand competition with asymmetric marginal costs this article tests the prediction of three discrete asymmetric duopoly price competition games in the laboratory the games differ from each other in terms of the size of the cost asymmetry that induces a systematic variation in the difference between the firms marginal costs while the standard theory requires the low cost firm to set a price just equal to the high cost firm s marginal cost which is identical across all three games and win the entire market intuition suggests that market price may increase with a decrease in the absolute difference between the two marginal costs we develop a quantal response equilibrium model to test our competing conjecture jel l11 l12 c91 d43

strategic trading behavior and price distortion in a manipulated market anatomy of a squeeze abstract this paper investigates an attempted delivery squeeze in a bond futures contract traded in london using cash and futures trades of dealers and customers we analyze their strategic trading behavior price distortion and learning in a market manipulation setting we argue that marked differences in settlement failure penalties in the cash and futures markets create conditions that favor squeezes we recommend that regulators require special flagging of forward term repurchase agreements on the key deliverables that span futures contract maturity dates and that exchanges mark to market their contract specifications more frequently or consider a cash settled contract on a basket of bonds

self regulation and government oversight self regulation is a feature of a number of professions for example in the u s the government delegates aspects of financial market regulation to self regulatory organizations sros like the new york stock exchange and the national association of securities dealers we analyse one regulatory task of an sro enforcing antifraud rules so agents will not cheat customers specifically we model contracting enforcement as a two tier problem an sro chooses its enforcement policy the likelihood that an agent is investigated for fraud and a penalty schedule given an enforcement policy agents compete by offering contracts that maximize customers expected utility we assume that the sro s objective is to maximize the welfare of its members the agents we show that the sro chooses a more lax enforcement policy meaning less frequent investigations than what customers would choose a general conclusion is that control of the enforcement policy governing contracts confers substantial market power to a group of otherwise competitive agents we also investigate government oversight of the self regulatory process the threat of government enforcement leads to more enforcement by the sro just enough to pre empt any government enforcement copyright 2005 wiley blackwell

when should we use intellectual property rights the economic analysis of property rights proceeds in two steps the first distinguishes rival from nonrival goods the second contrasts the welfare effects of property rights for these two types of goods for rival goods strong property rights lead to efficient outcomes for nonrival goods property rights involve the trade off formalized by william nordhaus 1969 weak property rights lead to under provision strong property rights create monopoly distortions recent discussions of copyright protection for recorded music have obscured the underlying economic issues interested firms deny that music sharing will reduce the incentives for firms to release new recordings artists and recording companies never acknowledge the efficiency costs of prices that far exceed marginal cost it is left to economists with no stake in the outcome to clarify these issues full disclosure i have not consulted for anyone in the napster case the stakes in the battle over the music business are small enough to get lost in rounding

market for software vulnerabilities think again software vulnerability disclosure has become a critical area of concern for policymakers traditionally a computer emergency response team cert acts as an infomediary between benign identifiers who voluntarily report vulnerability information and software users after verifying a reported vulnerability cert sends out a public advisory so that users can safeguard their systems against potential exploits lately firms such as idefense have been implementing a new market based approach for vulnerability information the market based infomediary provides monetary rewards to identifiers for each vulnerability reported the infomediary then shares this information with its client base using this information clients protect themselves against potential attacks that exploit those specific vulnerabilities the key question addressed in our paper is whether movement toward such a market based mechanism for vulnerability disclosure leads to a better social outcome our analysis demonstrates that an active unregulated market based mechanism for vulnerabilities almost always underperforms a passive cert type mechanism this counterintuitive result is attributed to the market based infomediary s incentive to leak the vulnerability information inappropriately if a profit maximizing firm is not allowed to or chooses not to leak vulnerability information we find that social welfare improves even a regulated market based mechanism performs better than a cert type one but only under certain conditions finally we extend our analysis and show that a proposed mechanism federally funded social planner always performs better than a market based mechanism

trading higher software piracy for higher profits the case of phantom piracy faced with the sustained problem of piracy that costs nearly 40 billion in annual revenue losses the software industry has adopted a number of technical legal and economic strategies to curb piracy and stem the resulting losses our work complements and contributes to the existing literature by exploring the possible effect of another economic lever product bundling on the relationship governing piracy and seller profits the traditional economic rationale of demand pooling from bundling that enables sellers to extract higher surplus and its particular attractiveness for information goods with negligible marginal and bundling costs carry over to our analysis however the presence of piracy injects several new facets to our analysis bundling creates a shared level of piracy of disparate products and under certain conditions to the detriment of one of the products we argue that by construction of the copyright laws the act of bundling itself can have a deterrence effect this deterrence effect alo

further results on the bertrand game with different marginal costs this note provides an alternative construction to blume 2003 of equilibria in the standard model of bertrand competition with homogeneous products and different marginal costs that achieve the conventional outcome in addition i provide a means to select one of these equilibria

characteristics of buyers and renters of cultural goods the case of movies this article identifies the characteristics of consumers of movies watched on videotapes in their homes models of the frequency of movie video buying and renting by individuals are estimated using data from the spanish cultural consumption habits survey encuesta sobre habitos de consumo cultural this survey featured information about videotapes rented and bought in spain throughout 1998 applying a multinomial probit modelling framework this study analyses whether there are two different video markets renting and buying and any discernible socio economic characteristics for their respective consumers the influence of film genres on the renting of movie videotapes is also considered

pricing information goods a strategic analysis of the selling and pay per use mechanisms we analyze two pricing mechanisms for information goods these mechanisms are selling where up front payment allows unrestricted use and pay per use where payments are tailored to use we analytically model a market where consumers differ in use frequency and where use on a pay per use basis invokes a psychological cost associated with the well known ticking meter effect we demonstrate that pay per use yields higher profits in a monopoly provided the associated psychological cost is low in a duopoly one firm uses selling and the other uses pay per use here in contrast to the monopoly selling yields higher profits than pay per use we demonstrate that surprisingly the profits of both duopolists can increase as the psychological cost associated with pay per use increases next we show that uncertainty in consumer use frequency does not affect pay per use in a monopoly but lowers profits from selling in a duopoly both the seller and the pay per use provider obtain lower profits when use frequency is uncertain we also analyze how pricing mechanism performance is affected if the firms cannot commit to prices if the pay per use provider offers a two part tariff and if consumers are risk averse

monopoly manipulation and the regulation of futures markets in the textbook model of competition all buyers and sellers are tiny compared with the market as a whole these people trade fungible commodities in an ongoing auction every seller s product is the same as every other s all participants in the market are sophisticated every buyer continues to purchase so long as the price is less than the value he places on the commodity every seller continues to sell so long as the price is greater than the marginal cost of production new buyers and sellers can jump in at an instant s notice and if they find the going rough they can jump out again no one can take advantage of a trading partner because someone else will offer the prospective victim a better deal information about bids and offers spreads instantly to all participants and would be entrants every beneficial trade takes place the trading leads to an outcome that is best for each buyer each seller and society as a whole of course textbook economies occur only in textbooks it is commonplace to lament the fact that traders are not microscopic compared with the market traders are gullible entry and exit

strategic responses to regulatory threat in the credit card market abstract models of endogenous regulatory threat suggest that firms may cut prices in order to ease a threat of regulation i test the implications of these models using stock market data from an episode of regulatory threat in the credit card market the data show that the initial threat led to negative abnormal returns for a portfolio of credit card issuers consistent with the regulatory threat hypothesis price cuts announced after the threat led to abnormal returns that are significantly more positive than those following similar cuts outside the period of regulatory threat this pattern exists not only for those issuers announcing cuts but also for their rivals which suggests that the cuts reduced an industry wide threat of regulation factors that proxy for issuers exposure to and influence on the probability of regulation affect the size of these returns which provides corroborative evidence in favor of the regulatory threat hypothesis

all equilibria in a class of bidding games abstract we consider a class of bidding games under complete information and construct a continuum of pure and mixed strategy equilibria as corollaries of our results we obtain a continuum of equilibria for the n bidder first price auction and the n firm bertrand game

copying and indirect appropriability photocopying of journals creators and owners of intellectual properties are alarmed by the growth of technologies that ease the tasks of copying these properties this paper however shows that the unauthorized copying of intellectual properties need not be harmful and actually may be beneficial the empirical impact of photocopying on publishers of journals is examined in an attempt to discover if publishers can indirectly appropriate revenues from users who are not original purchasers the evidence indicates that publishers can indirectly appropriate revenues from users who do not directly purchase journals and that photocopying has not harmed journal publishers 18 references 1 table

the self regulation of commodity exchanges the case of market manipulation influential economists argue that government regulation of manipulative practices in financial markets is unnecessary because exchanges have incentives to take nearly first best precautions against the exercise of market power this article shows that the theoretical arguments underlying this proposition are weak because exchange members are likely to ignore the effects of manipulation on inframarginal traders and price informativeness competition between exchanges may be limited and collective action problems preclude efficient exchange intervention for these reasons exchanges will likely take few precautions against market power an examination of the history of self regulation at 10 exchanges prior to the passage of laws proscribing manipulation shows that they took few if any measures to curb manipulation since the characteristics of manipulation imply that it can be deterred efficiently through the use of harm based sanctions this theory and evidence strongly suggest that self regulation is a

piracy on the silver screen using survey data on movie consumption by about 500 university of pennsylvania undergraduate students we ask whether unpaid consumption of movies displaces paid consumption a variety of cross sectional and longitudinal empirical approaches show large and statistically significant evidence of displacement in the most appropriate empirical specification we find that unpaid first consumption reduces paid consumption by about 1 unit unpaid second consumption has a smaller effect about 0 20 units our analysis indicates that unpaid consumption which makes up 5 2 per cent of movie viewing in our sample reduced paid consumption in our sample by 3 5 per cent

asymmetric information bargaining problems with many agents a yes or no decision must be made about some issue all agents must agree the coase theorem asserts that the efficient outcome will always result suppose the value positive or negative that an individual attaches to an affirmative decision is privately known to that individual it is proved under very mild conditions that with independent types as the number of agents increases the probability of an affirmative efficient decision goes to zero an example in which it is common knowledge that an affirmative decision is efficient and yet the probability of such a decision goes to zero is given

perspectives on positive political economy this volume serves as an introduction to the field of positive political economy and the economic and political processes with which it is concerned this new research tradition is distinct from both normative and historical approaches to political economy grounded in the rational actor methodology of microeconomics positive political economy is the study of rational decisions in a context of political and economic institutions more analytical than traditional approaches it is concerned with the derivation of principles and propositions against which real world experience may be compared its focus is on empirical regularities and its goal is theoretical explanation the field has focused on three main areas of research models of collective action constraints on competitive market processes and the analysis of transaction costs developments in all of these areas are covered in the book the first part of the volume surveys the field while the second part displays positive political economy at work examining a variety of subjects the final part contains essays by leading political economists on the theoretical foundations of the field

durability market structure and new used goods models focuses on the relationship between market structure and monopoly power durability models new used goods model durability and monopoly in the new used model interdependence between market structure and durability ebsco

why and how to regulate power exchanges in the eu market integration context abstract the european union eu market integration is leading to increasingly monopolistic electricity market infrastructures which has opened a debate on the regulation of these so called power exchanges in this paper we start by stating that there are two types of power exchanges in europe i e merchant and cost of service regulated power exchanges we then discuss how regulation can be used to better align their incentives with the main power exchange tasks we conclude that adopting the cost of service regulated model for all power exchanges in europe could be counterproductive in the current context but that regulation can help ensure that the benefits of the eu market integration materialize promising regulatory actions include tempering the reinforced market power of power exchanges and quality of service regulation for the ongoing cooperation among power exchanges to organize trade across borders

asymmetric information about rivals types in standard auctions an experiment this paper studies experimentally how information about rivals types affects bidding behavior in firstand second price auctions the comparative static hypotheses associated with information about rivals enables us to test the relevance of such information as well as the general predictions of the auction theory by providing an effective means to control for risk aversion and other behavioral motives that were difficult to control for in previous experiments our experimental evidence provides strong support for the theory and sheds light on the roles of risk aversion and the spite motive in first and second price auctions respectively

bertrand without fudge abstract this paper reexamines bertrand competition with homogeneous products and different marginal costs it is shown that the conventional outcome is supported by an equilibrium in the original game under the standard rationing rule

buyer power and intrabrand coordination we analyze the competitive effects of vertical contracts in a contracting situation where rival retailers offer contracts to a manufacturer in contrast to bernheim and whinston 1998 who study the situation in which competing manufacturers offer contracts to a common retailer we find that two part tariffs even if contingent on exclusivity or not do not suffice to implement the monopolyoutcome richer arrangements including e g conditional fixed fees and upfront payments are thus required to internalize all contracting externalities the welfare implications are ambiguous on the one hand richer contracts ensure that no efficient retailer is excluded on the other hand they allow firms to maintain monopoly prices despite intrabrand competition simulations suggest that the latter effect may be more significant

manipulation of the commodity futures market delivery process an analysis of the futures market delivery end game specifies necessary and sufficient conditions for long and short traders to manipulate futures prices at contract expiration the empirical and welfare implications of manipulation are derived as well manipulation is most likely to occur in markets where economic frictions such as transportation and transactions costs make it inefficient to return excessive deliveries to their original owners these consumption distortions induce price changes that favor manipulators manipulation may also occur in markets where such costs are unimportant but the necessary conditions for the manipulation of a frictionless market are very restrictive copyright 1993 by university of chicago press

bertrand competition with intermediation abstract we consider a duopolistic bertrand competition setting in which competing firms can turn into intermediaries the intermediation option allows firms to take advantage of the rival firm s low price we then give conditions for the existence of equilibrium

the stock pools and the securities exchange act abstract the stated justification for the securities exchange act of 1934 exchange act was to eliminate manipulation the primary evidence of manipulation was the existence of stock pools through which groups of traders jointly traded in a particular stock the conclusion of congress that the pools were manipulative is inconsistent with the evidence produced by the senate s own investigation the returns on a sample of pool stocks are also inconsistent with manipulation these findings suggest that congressional and presidential desires to increase political control over the new york stock exchange was a more important motivation for the exchange act