Douglas Lichtman

Shared Information Goods

Once purchased, information goods are often shared within small social communities. Software and music, for example, can be easily shared among family or friends. In this paper, we ask whether such sharing will undermine seller profit. We reach several surprising conclusions. We find, for example, that under certain circumstances sharing will markedly increase profit even if sharing is inefficient in the sense that it is more expensive for consumers to distribute the good via sharing than it would be for the producer to simply produce additional units. Conversely, we find that sharing can markedly decrease profit even where sharing reduces net distribution costs. These results contrast with much of the prior literature on small-scale sharing, but are consistent with results obtained in related work on the topic of commodity bundling. Our findings highlight the relative importance of demand reshaping, as opposed to cost considerations, in determining the profitability effects of sharing. Copyright 1999 by the University of Chicago.

Entry Policy in Local Telecommunications: Iowa Utilities and Verizon

This paper offers legal and economic analysis of two recent Supreme Court decisions, AT&T Corporation v. Iowa Utilities Board and Verizon Communications v. FCC. The paper is written with two audiences in mind. For those unfamiliar with the cases, we offer what we hope is an accessible yet detailed account of the underlying policy issues raised by a legal regime that requires incumbent local telephone carriers to lease parts of their telephone networks to would-be rivals. To that end, we discuss the main reasons why sharing rules are sometimes imposed in markets like the market for local telephone service, and we then link those issues to the specific legal questions at issue in these cases. For those already well versed in those issues, by contrast, we have woven into our account a variety of new ideas about both the relevant legal analysis and the underlying economics. We explain, for example, how low access prices might encourage incumbents to invest in new infrastructure despite the intuitive argument to the contrary, and how the Commissions seemingly nonsensical pick-and-choose rule can actually accomplish important policy goals, working in essence as a statutory most-favored-nation clause. In the end, then, we hope this paper will have value both for those relatively well steeped in telecommunications policy and for those just beginning to learn these issues.

Indirect Liability for Copyright Infringement: Napster and Beyond

When individuals infringe copyright, they often use tools, services, and venues provided by other parties. An enduring legal question asks to what extent those other parties should be held liable for the resulting infringement. For example, should a firm that produces photocopiers be required to compensate authors for any unauthorized copies made on that firms machines? What about firms that manufacture personal computers or offer Internet access; should they be held liable, at least in part, for online music piracy? In this essay, we examine how modern copyright law addresses these questions and we evaluate the resulting system on economic grounds.

Copyright as Innovation Policy: Google Book Search from a Law and Economics Perspective

The copyright system has long been understood to play a critical role when it comes to the development and distribution of creative work. Copyright serves a second fundamental purpose, however: it encourages the development and distribution of related technologies such as hardware that might be used to duplicate creative work and software that can manipulate it. When it comes to issues of online infringement, then, copyright policy serves two goals, not one: protect the incentives copyright has long served to provide authors and at the same time facilitate the continued emergence of innovative Internet services and equipment. In this chapter, I use the Google Book Search litigation as a lens through which to study copyright law’s efforts to serve these two sometimes‐competing masters. The Google case is an ideal lens for this purpose because both the technology implications and the authorship implications are apparent. With respect to the technology, Google tells us that the only way for it to build its Book Search engine is to have copyright law excuse the infringement that today by design is part of the project. With respect to authorship, copyright owners are resisting that result for fear that the infringement here could significantly erode both author control and author profitability over the long run. I myself am optimistic that copyright law can and will balance these valid concerns. The chapter explains how, discussing not only the formal legal rules but also the economic intuitions behind them.