119,260 research outputs found

    An Economic Analysis of the Software Market with a Risk-Sharing Contract

    Get PDF
    Low quality of software has been blamed for poor security of our computer networks as major viruses and worms exploit the vulnerabilities of such software. However, software vendors have no incentive to improve the quality of their products since they are not directly liable for any loss due to poor quality. Software liability has been intensely discussed among computer scientists and jurists for years as a possible solution for software quality improvement. This paper proposes a risk-sharing mechanism between software vendors and customers as a market-driven method to impose software liability. We consider two dimensions of software quality: functionality and security quality. We present an economic model of the software market with a risk-sharing mechanism, which takes into account the strategic interplay of risk-sharing and security quality of the software given a certain level of functionality. We then apply this model in different scenarios, and examine the implications of the risk-sharing mechanism in the context of cyber security. Our model provides evidence of under-provided security quality of software in the monopoly case, as has been observed in the market. We consider the feasibility and effectiveness of the risk-sharing mechanism under various scenarios, and find the conditions under which the proposed mechanism is promising

    The relationship between copyright and contract law

    Get PDF
    Contracts lie at the heart of the regulatory system governing the creation and dissemination of cultural products in two respects: (1) The exclusive rights provided by copyright law only turn into financial reward, and thus incentives to creators, through a contract with a third party to exploit protected material. (2) From a user perspective purchases of protected material may take the form of a licensing contract, governing behaviour after the initial transaction. Thus, a review of the relationship between copyright and contract law has to address both supply- and demand-side issues. On the supply side, policy concerns include whether copyright law delivers the often stated aim of securing the financial independence of creators. Particularly acute are the complaints by both creators and producers that they fail to benefit from the exponential increase in the availability of copyright materials on the Internet. On the demand side, the issue of copyright exceptions and their policy justification has become central to a number of reviews and consultations dealing with digital content. Are exceptions based on user needs or market failure? Do exceptions require financial compensation? Can exceptions be contracted out by licence agreements? This report (i) reviews economic theory of contracts, value chains and transaction costs, (ii) identifies a comprehensive range of regulatory options relating to creator and user contracts, using an international comparative approach, (iii) surveys the empirical evidence on the effects of regulatory intervention, and (iv) where no evidence is available, extrapolates predicted effects from theory

    Efficient Contracts for Digital Content

    Get PDF
    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.internet, music industry, social preferences, reciprocity, moral hazard, file sharing

    Pricing and Investments in Internet Security: A Cyber-Insurance Perspective

    Full text link
    Internet users such as individuals and organizations are subject to different types of epidemic risks such as worms, viruses, spams, and botnets. To reduce the probability of risk, an Internet user generally invests in traditional security mechanisms like anti-virus and anti-spam software, sometimes also known as self-defense mechanisms. However, such software does not completely eliminate risk. Recent works have considered the problem of residual risk elimination by proposing the idea of cyber-insurance. In this regard, an important research problem is the analysis of optimal user self-defense investments and cyber-insurance contracts under the Internet environment. In this paper, we investigate two problems and their relationship: 1) analyzing optimal self-defense investments in the Internet, under optimal cyber-insurance coverage, where optimality is an insurer objective and 2) designing optimal cyber-insurance contracts for Internet users, where a contract is a (premium, coverage) pair

    Mandatory Unisex Policies And Annuity Pricing: Quasi-Experimental Evidence From Germany

    Get PDF
    We analyse the effect of abolishing gender-based categorisation of risks on the pricing of annuity contracts. Under the absence of screening activities, we find clear evidence of insurers expecting strong adverse selection effects. In particular, most of the unisex contracts’ payouts closely resemble those from women’s policies before the reform. Hence the policy target is not met and there are large efficiency losses for men. We conclude that there seems to be little hope for unisex policies to meet their equity ob jectives if consumers can react on the extensive margin, unless subsidies are extremely large.

    Mandatory unisex policies and annuity pricing: quasi-experimental evidence from Germany

    Get PDF
    We analyse the effect of abolishing gender-based categorisation of risks on the pricing of annuity contracts. Under the absence of screening activities, we find clear evidence of insurers expecting strong adverse selection effects. In particular, most of the unisex contracts’ payouts closely resemble those from women’s policies before the reform. Hence the policy target is not met and there are large efficiency losses for men. We conclude that there seems to be little hope for unisex policies to meet their equity objectives if consumers can react on the extensive margin, unless subsidies are extremely large.

    The Structure of Payments in Technology Transfer Contracts: Evidence from Spain

    Get PDF
    I analyze a sample of contracts for the acquisition of technology by Spanish firms, where I observe firm and technology characteristics, as well as the type of scheduled payments, whether fixed and/or variable. I find first that technology type influences the chances of the parties reaching an agreement, and second, that the explanations for observed payments based on moral hazard or risk aversion alone are not satisfactory. I argue that all these theories fail to take into account the fact that the contractual relationship is extended along time and that the parties will choose the kind of payments that better estimate the value of the relationship.

    It\u27s Time for a Good Hard Look in the Mirror: The Corporate Law Example

    Get PDF
    This Article asserts that the move from the industrial age to the information age represents a fundamental change to our society on such a widespread basis that the legal order must reexamine the premises about how our society functions, assessing whether foundational elements of U.S. Common Law remain valid. This Article first confronts briefly the continuing acceptance of certain foundational premises in contract and intellectual property law, illustrating that such premises are no longer supported by the realities of modern society. With fundamental change challenging multiple areas of law in the information age, this problem is worthy of widespread inquiry by legal scholars in various fields. This Article then turns to a detailed analysis of the premises supporting shareholder primacy in corporate law, demonstrating that the historic justifications for allocations of ownership, control and duties no longer support these premises. Based on the relative needs of today’s businesses vis-à-vis the contributions of various other constituencies, this Article asserts that employees should also have certain duties owed to them. This Article concludes with a novel model for creating such a stake in the form of a springing right to profit sharing

    Determinants of Inter-Firm Contractual Relations: A Case of Indian Software Industry

    Get PDF
    We analyze the impediments to inter-firm contractual relations, existing formal and informal ways of getting around them, especially the role of reputation and trust in mitigating the conflict of interest between the firms. We study it in the context of Indian IT industry. Contract design is specified as a function of reputation (age, repeated contracts and quality certification), asset specificity, complexity and uncertainty. We test the likelihood of observing Time & Material contract, a better propertied contract in the face of uncertainty. Empirical evidence conforms the propositions posited. Reputed firms tend to get highly complicated and uncertain projects. Asset specific investments do not seem to have any implication on contract type and complexity. The results broadly hint that the firms reckon more on creating an understanding through formal quality certifications to solve pre-contractual adverse selection problems and repeated contracting to solve the problems of behavioral uncertainties rather than relying on the court.Transaction Cost; Inter-firm Contractual Relations; Reputation and Outsourcing

    An Economist's Guide to Digital Music

    Get PDF
    In this guide, we discuss the impact of digitalization on the music industry. We rely on market and survey data at the international level as well as expert statements from the industry. The guide investigates recent developments in legal and technological protection of digital music and describes new business models as well as consumers' attitude towards music downloads. We conclude the guide by a discussion of the evolution of the music industry
    • 

    corecore