Wednesday, December 9, 2009

File sharing is welfare enhancing

Intellectual property for music is rapidly eroding, and the big music labels are complaining loudly about this. They argue that file sharing and other illicit duplication is eroding their revenue and thus the artists' (and some other people's) income. We have shown previously that less copyright is better for artistic creation, and thus welfare, But let us abstract from this and ask whether file sharing in itself is bad for society.

Jean-Jacques Herings, Ronald Peeters and Michael Yang address this using a model where consumers can choose the medium of the music they acquire every period, and music label are forward looking in their pricing strategy, as consumers lock into their medium choice, to some extent. There is thus an incentive to keep CD prices low, both to attract current sales, but also to entice consumers to buy CDs is the future as well. Also, file sharing keeps monopolistic behavior of the music industry at bay. The results: while file sharing reduces the music industry's profits, it increases the amount of music enjoyed by the population, and thus welfare. We should do not the same with our research in Economics. Wait, we already do

1 comment:

Agent Continuum said...

Well, we do, unless you're away from campus and the paper you need is walled by Elsevier or JStor and company. :-(