Innovation Incentives for Information Goods

This version published in "Innovation Incentives for Information Goods," Innovation Policy and the Economy eds. Adam B. Jaffe, Josh Lerner and Scott Stern, 2007 vol. 7. Previous version in published as “Slicing the Gordian Knot: A Novel Mechanism for Providing Innovation Incentives for Digital Goods” in Proceedings of the International Conference on Information Systems, December, 2004.Innovations can often be targeted to be more valuable for some consumers than others. This is especially true for digital information goods. We show that the traditional price system not only results in significant deadweight loss, but also provides incorrect incentives to the creators of these innovations. In contrast, we propose and analyze a profit-maximizing mechanism for bundles of digital goods which is more efficient and more accurately provides innovation incentives for information goods. Our “statistical couponing mechanism” does not rely on the universal excludability of information goods, which creates substantial deadweight loss, but instead estimates social value created from new goods and innovations by offering coupons to a relatively small sample of representative consumers. We find that the statistical couponing mechanism can operate with less than 0.1% of the deadweight loss of the traditional price-based system, while more accurately aligning incentives with social value.The MIT Center for Digital Business, the National Bureau of Economic Research and that National Science Foundation (IIS-0085725) provided generous research funding

COPYRIGHTS, COMPETITION AND DEVELOPMENT: THE CASE OF THE MUSIC INDUSTRY

The economic importance of copyright industries in developed market economies has been well documented. Although less important in developing countries, this is likely to change with the growing weight of the service sector in these economies and its importance for their closer integration into the global market economy. This paper analyses the relationship between the copyright and income generation in the audio-visual sector, in particular music, and argues that the appropriate copyright administration is essential in creating the conditions for a viable music industry in developing countries. However, an effective copyright regime is not, by itself, sufficient to guarantee a flourishing music industry, and other institutional arrangements will be needed in countries looking to better exploit their musical resources.

Javna radio-televizija kao javno dobro: izazovi digitalnog doba

This article presents a summary of the most important standpoints of the economic debate about public service broadcasting as a public good, and its provision in both the analogue and digital age of broadcasting. Due to frequent technological developments, which heavily influence the broadcasting sector, this debate, initiated in 1958 by American economist Paul A. Samuelson, has continued up to the present day. It also reflects on the concept of PSM as a public good in a globalizing, multi-platform, usergenerated content infused media landscape. Finally, it ponders the future developments of PSM as a public good in the digital era of broadcasting.Članak donosi sažetak najvažnijih stajališta iz ekonomske teorije o javnoj radio-televiziji kao javnom dobru i osiguranju njezine ponude tijekom analognog i digitalnog razdoblja televizijskog emitiranja. Zbog čestih tehnoloških promjena koje značajno utječu na elektroničke medije rasprava o javnom radio-televizijskom servisu kao javnom dobru, koju je 1958. godine započeo američki ekonomist Paul A. Samuelson, nastavila se do danas. U članku se također prikazuje koncept javnog medijskog servisa kao javnog dobra u globalnom, višeplatformskom, korisnički usmjerenom medijskom okruženju. Na kraju se promišlja o budućem razvoju javnog medijskog servisa kao javnog dobra u digitalnom dobu emitiranja

The dominant Law and Economics paradigm regarding “Intellectual Property" – a vehicle or an obstacle for innovation, growth and progress?

The term "intellectual property" is a relatively a modern term, first used in its current meaning when the UN established the World Intellectual Property Organization (WIPO) in 1967. Beforehand laws around the world protected various aspects of informational goods - inventions and creations - using separate legal concepts, such as copyright, patents and trademarks, which were not perceived as property rights. This linguistic aspect is by no means anecdotal or marginal as it can be argued that the term "intellectual property" constituted its contemporary meaning including the economic analysis of informational goods and services, as can be demonstrated by the recent call to treat trade secrets not as a contractual agreement but as intellectual property (Epstein, 2005). This paper focuses on the normative analysis of IP rights and criticizes the implicit shift in economic analysis of IP from the incentives paradigm, which is founded upon the public good analysis of neo-classical micro-economic theory, to the new propriety paradigm, which is intellectually founded upon the tragedy of the commons literature. It further criticizes the dominant contemporary Law and Economics writings in this field as pre-assuming information to be an object of property, overlooking its fundamental differences from physical property and thus focusing on its management and maximization of value for its "owners" rather than on its initial justifications and its social value and contribution to innovation, growth and progress.Law; intellectual property; growth; incentives

Hedonic Information Systems: What We Know and What We Don\u27t Know

Users spend an increasing amount of time with pleasure-oriented technologies, such as video games or digital entertainment services, and these systems are of growing relevance as a business segment. In the light of this development, the information systems (IS) discipline has been criticized for dedicating insufficient research effort to these types of system, which are referred to as hedonic IS. Therefore, we conducted a descriptive literature review within the top 40 IS journals to summarize past research on hedonic IS and to identify research gaps. To structure our analysis, we separated the studies in our sample between those taking a user and those taking a provider perspective, assigned them to the phases of two life cycle models, and categorized the studies according to the investigated system type. The results reveal that hedonic IS research mostly takes a user perspective, predominantly addresses the (continued) use phase of the user life cycle, and investigates five different system types. Based on our findings, we point out promising opportunities for future research. Thus, our review may help researchers to plan further studies on hedonic IS

Sustaining local audiovisual ecosystems: shifting modes of financing and production of domestic TV drama in small media markets

Various trends, both technological and economic in nature, have led to a shift in the financing and production of serial television fiction (principally television drama and episodic comedy), resulting in pressure on existing financing of TV fiction. These pressures prove especially difficult for small nations and regions, being characterized by restricted markets, a limited number of active players, and barriers for export and scale. For media policy-makers, these transitions invoke a series of new challenges to sustain existing audio-visual ecosystems. Based on a case study of TV fiction in Flanders, and presenting evidence from a financial analysis of 46 TV fiction productions, this article analyses current financing streams, patterns and dynamics of TV fiction in small media markets. It seeks to reveal the composition of budgets and the relative importance of diverse agents and funders involved in TV fiction production. Critical evaluations are then offered as to whether current financing models and policy support mechanisms are fit to tackle the challenges posed by the increasing number of windows and increased fragmentation of TV fiction financing

Are secondary markets beneficial for a virtual world operator?

Selling virtual goods for real money has become the dominant business model for virtual worlds in the past decade. As the amount of money involved in virtual goods sales increases, market performance questions gain relevance. In this thesis, we examine the effects of secondary markets on the profitability of a virtual world service provider operating under a virtual goods sales model. More specifically, we ask whether the service provider should tolerate secondary markets or seek to kill them off. The structure of this thesis is as follows: we first review how virtual worlds operate as businesses and provide an analysis of the market conditions faced by a virtual world operator to provide sufficient context for the reader. We then examine the inner workings of virtual economies and review structures commonly encountered within them. Next, we conduct a literature review on real world secondary market models and analyses. Finally, we evaluate the implications of real world secondary market results on secondary markets for virtual goods. In the final section, we present conclusions and possible avenues for further study. We find that recent durable goods research suggests that a profit-maximizing monopolist will not shut down secondary markets, but will choose to reduce durability of goods instead and that these results can apply to virtual worlds as well. However, we also show that the question of allowing or not allowing secondary markets cannot be answered based on profitability alone and that service providers have to also account for externalities brought on by secondary markets

Consuming Linked Closed Data

The growth of the Linked Data corpus will eventually pre- vent all but the most determined of consumers from including every Linked Dataset in a single undertaking. In addition, we anticipate that the need for effective revenue models for Linked Data publishing will spur the rise of Linked Closed Data, where access to datasets is restricted. We argue that these impeding changes necessitate an overhaul of our current practices for consuming Linked Data. To this end, we propose a model for consuming Linked Data, built on the notion of continuous Information Quality assessment, which brings together a range of existing research and highlights a number of avenues for future work