Ben Depoorter

Fragmentation in Property: Towards a General Model

This paper develops a general model of anticommons fragmentation in property. To this end, we differentiate between different forms of property fragmentation. With the use of several functionally related examples, we consider the equilibria obtained under different scenarios. The various illustrations are later utilized as building blocks for the development of a general model of fragmented property. The model reveals that the private incentives of excluders do not capture the external effects of their individual decisions. Specifically, our model suggests that the results of underutilization of joint property increase monotonically in both (a) the extent of fragmentation; and (b) the foregone synergies and complementarities between the property fragments. Within this context, we explore some of the important implications for the institutional responses to issues of property fragmentation.

Fair Use and Copyright Protection: A Price Theory Explanation

Copyright scholars suggest that computer technology has reduced transaction costs associated with copyright transfer, allegedly eliminating the need for the fair use doctrines that were developed to allow limited use of copyrighted material in situations where the transaction costs of securing authorized use would be prohibitive. According to this emerging view, in an ideal world with no contracting costs, third party use of copyrighted material could realistically only take place with the express consent of the copyright holder. This would give the author absolute power to dispose of his work, including the right to veto uses, without the possibility of a fair use override of any sort. This paper shows the limits of such transaction-cost based arguments. If transaction costs provide the dominant economic justification of fair use doctrines, an exogenous reduction of such transaction costs would limit the scope and application of the defense of fair use. Nevertheless, in this paper we suggest that, when viewed in light of the anticommons theory, fair use doctrines retain a valid efficiency justification even in a zero transaction cost environment. Fair use defenses are justifiable, and in fact instrumental, in minimizing the welfare losses prompted by the strategic behavior of the copyright holders. Even if copyright licenses can be transferred at no cost (for instance, in a click and pay frictionless computer world), the strategic behavior of the copyright holders would still create possible deadweight losses. In this context we identify a number of critical variables that should guide and constrain the application of fair use doctrines. These variables include (a) the number of copyright holders; (b) the degree of complementarity between the copyrighted inputs; (c) the degree of independence between the various copyright holders in the pricing of their licenses; and (d) ability to price discriminate.

Simultaneous and Sequential Anticommons

This paper defines a framework for anticommons analysis based on the fragmentation of property rights. In differentiating between sequential and simultaneous cases of property fragmentation, we describe and assess the equilibria obtained under each scenario. Our model reveals how the private incentives of excluders do not capture the external effects of their decisions. Moreover, our model suggests that the result of underutilization of joint property increases monotonically in both (a) the extent of fragmentation; and (b) the foregone synergies and complementarities between the property fragments. Within this context, we can therefore explore important implications for possible institutional responses to a range of issues raised by the concept of property fragmentation.

Problems with the enforcement of copyright law: is there a social norm backlash?

Abstract As a result of technological changes, copyright norms have developed in opposition to existing copyright law. In this article we examine how copyright enforcement efforts, mainly lawsuits against private copying, may induce further copyright disobedience by reinforcing the moral and social beliefs against conventional copyright law. In this paper we review recent theoretical and empirical studies and assess the hypothesis of countervailing copyright norm effects from copyright enforcement.

The Market for Intellectual Property: The Case of Complementary Oligopoly

This paper applies a model of complementary oligopoly and anticommons pricing to the market for intellectual property rights. Our model demonstrates a surprising and interesting overlooked result: In the market for complementary goods, price coordination and monopolistic pricing do not necessarily represent inefficient equilibria, when compared to the alternative Nash equilibrium. Due to the peculiar cross-price effects in the supply of complementary goods, price coordination and monopolistic supply often constitute an improvement over the alternative equilibrium outcomes. To be precise, the welfare effects of competition and price coordination depend on the nature of the intellectual product concerned. This has significant and obvious implications for the economic analysis of copyright collectivization, as well as for antitrust regulation in this area.

Never Two Without Three: Commons, Anticommons and Semicommons

A semicommons regime exists when the efficient use of a resource requires the co-existence of both common and private uses. In a seminal article, Henry Smith examined the system of semicommons property in regard to medieval open fields. In such a system, peasants shared common land for collective grazing, but used privately owned scattered strips for grain growing. This paper provides the first formal model of semicommons property regimes. Our model demonstrates (1) how the costs of strategic behavior in semicommons regimes may outweigh those in commons regimes and (2) how semicommons regimes may solve collective action problems by introducing anticommons arrangements. We extend previous property literature by offering new insights as to conditions in which mixed property regimes emerge and fragmentation solutions are favored.

Putting Humpty Dumpty Back Together: Experimental Evidence of Anticommons Tragedies

Recently, a new theory has drawn considerable attention in the literature on common property. A number of scholars have pointed to the danger of excessive propertization in the context of what are termed “anticommons” property regimes. Although this theory has found its way into numerous legal and economic applications, the empirical and cognitive foundations of the theory of fragmentation remain unexplored. Based on experimental data, this Article conducts an investigation into the social and personal processes involved in the anticommons. The results confirm the theoretical proposition that anticommons deadweight losses increase with the degree of complementarity between individual parts and with the degree of fragmentation. Our study also provides three novel insights into the problem of fragmentation. First, the data illustrate that individual right holders base their reservation price on a proportion of the expected surplus of the bundler-purchaser, disregarding the objective value of the resource. Second, the experiments suggest that uncertainty amplifies the anticommons pricing effect. Individual right holders ignore the expected value of the purchaser’s project, and instead focus on the upper range of profitability and surplus. Willingness to accept is anchored onto a proportion of the maximum profitability, rather than a proportion of the expected benefits of the project. Finally, throughout the experiment reservation prices seem to be consistently lower in cases where there exists large uncertainty within the range of positive outcomes, relative to scenarios where there is relative certainty regarding a positive outcome but which includes the possibility of a (modest) negative outcome. Subjects seem to emphasize the relative low probability of success over the possibility of a negative outcome. The experiment provides clear indications of the pricing effect in settings where complementary units are fragmented over individual right holders. Given the stickiness of initial selling prices, and the prospective costs of the required negotiations to drive prices down to the expected value of the project, value maximizing projects might be abandoned, leading to the tragic outcome of under use or idleness. The results thus reinforce the normative hypothesis of the anticommons: property right systems should be careful in allowing the liberal creation and fragmentation of property rights. PUTTING HUMPTY DUMPTY BACK TOGETHER: PRICING IN ANTICOMMONS PROPERTY ARRANGEMENTS * * * BEN DEPOORTER YALE LAW SCHOOL J.S.D. CANDIDATE & GEORGE MASON LAW SCHOOL VISITING PROFESSOR (FALL ’04) Tel. 203–415-2039 Email: ben.depoorter@yale.edu & SVEN VANNESTE UNIVERSITY OF CALIFORNIA AT BERKELEY VISITING SCHOLAR 1 Hosted by The Berkeley Electronic Press PUTTING HUMPTY DUMPTY BACK TOGETHER: PRICING IN ANTICOMMONS PROPERTY ARRANGEMENTSThis Article conducts an experimental investigation of anticommons dilemmas. The results confirm that anticommons deadweight losses increase with the degree of complementarity and the degree of fragmentation of property. Our study further provides three novel insights into the problem of fragmentation. First, the data illustrates that individual right holders ignore the expected value of bundling and instead focus on the maximum profit he or she could realize by bundling. Second, the experiments suggest that uncertainty amplifies the anticommons pricing effect. Finally, cooperation is higher in cases wherethe value of bundling is more uncertain as opposed to scenarios where there is relative certainty of creating surplus but there is a (modest) chance of losses from bundling.

What happened to video game piracy

How video games thrive in a world of piracy.

Whistle Blowing: An Economic Analysis of the False Claims Act

Whistle blowing, remuneration and immunity are effective tools whenever law enforcement is impeded by information asymmetries. The U.S. False Claims Act (FCA), which allows private individuals to litigate fraudulent claims on behalf of the government, has been instrumental in combating government fraud. In this paper we reveal a number of limitations and weaknesses of rewards as an alternative to punishment-based deterrence. The main findings can be summarized as follows. The gap between social and private incentives negatively affects the decision to file a qui tam case and the timing of whistle blowing. First, the divergence between private and social incentives of whistle blowing generates sub-optimal amounts of whistle blowing litigation in at least two instances. Whistle blowing is underprovided in all cases where free riding by the government discourages potential whistle blowers from initiating a socially valuable case. Whistle blowing is overprovided whenever qui tam private incentives conflict with social enforcement objectives. While the government weighs the wider spectrum of enforcement (the effect of an individual case on a multiple claim suit, etc.), an insider will blow the whistle whenever his expected recovery exceeds the expected costs of litigation. This autonomy of whistle blowers to pursue claims without government involvement, weakens the governments bargaining position towards the fraudulent party. Second, whenever rewards are tied to recovery, bounties create a perverse incentive whereby fraudulent practices are not terminated at a socially optimal point in time. The potential reward race among whistle blowers cannot mitigate this effect fully because the stigma and loss of opportunities on the job market act as internal constraints on whistle blowing.

Misunderstandings between Contracting Parties: Towards an Optimally Simple Legal Doctrine

Unfortunately, in practice, this process of communication often runs into difficulties. Various types of misunderstanding may arise. One of the parties may believe that the contract was concluded, whereas the other party assumes it has made an offer without commitment. One party thinks that he sold object A while the other party intended to buy object B. One party believes that the contract contains a liability exemption, whereas the other party is unaware of this.