Richard Watt

How to Best Ensure Remuneration for Creators in the Market for Music? Copyright and its Alternatives

The focus of this essay is to examine the market for copyrighted works with a particular emphasis on the sound recording market. This market is currently in a state of flux, some would say disarray, due to the ability of the Internet to lower transmission costs for both authorized and unauthorized copies, with the latter being, at this time, far more prevalent. In this essay we discuss the intent of copyright, the role of copying and file-sharing, and some alternative production/consumption schemes meant to strengthen or to replace copyright.

Full Insurance, Bayesian Updated Premiums, and Adverse Selection

In the classic Rothschild-Stiglitz model of adverse selection in a competitive environment, we analyse a “no-claims bonus” type contract (bonus-malus). We show that, under full insurance coverage, if the insurance company applies Bayess rule to learn about client probability types over time and uses this information in premium calculations for contract renewals, then there exist conditions under which all client types strictly prefer the Bayesian updating contract to the classic Rothschild-Stiglitz separating equilibrium.

Risk sharing and the distribution of copyright collective income

This innovative and insightful book, written by some of the leading academics in the field, advances research frontiers on intellectual property and copyright issues. Topics addressed include: peer-to-peer music file sharing, optimal fair use standards, the benefits of copyright collectives, copyright and market entry, alternatives to copyright, the impact of copyright on knowledge production, the proper balance between copyright and competition law, and the application of systematic principles to issues that arise at the periphery of intellectual property law – all with an eye toward economics.

The Hybrid Open Access Citation Advantage: How Many More Cites is a

We study the hybrid open access (HOA) citation effect. Under HOA Pilot agreements, HOA is assigned for all articles of eligible authors. We use unique data on 208 (1,121) HOA (closed access) economics articles. We control for the quality of journals, articles and institutions and citations to RePec pre-prints. Performing Poisson quasi-maximum likelihood regressions, HOA turns out to be a significant predictor of citations with marginal effects ranging between 22% and 26%. However, once we additionally control for institution quality and citations to RePEc pre-prints, the marginal HOA citation advantage turns out to insignificant and drops to 0.4%.

3,000 Fee Buying You?

This paper generalizes and unifies the traditional quantity competition oligopoly models of Cournot and Stackelberg. Traditional oligopoly models predict that, under constant marginal costs, there will only be one market share (Cournot) or a single firm with a large market share and all others with the same market share (Stackelberg). Without altering the basic assumption set, in particular the assumptions of common marginal cost functions, perfect information and linear demand, the paper presents a general model that may be useful to explain many real-life situations of oligopoly competition, where many different market shares may coexist. Finally, it is shown that certain existing social welfare results are robust to the generalization.

A Generalized Oligopoly Model

We describe the results of an experiment on decision making in an insurance context. The experiment was designed to test for the underlying rationality of insurance consumers, where rationality is understood in usual economic terms. In particular, using expected utility as the preference function, we test for positive marginal utility, risk aversion, and decreasing absolute risk aversion, all of which are normal postulates for any microeconomic decision context under uncertainty or risk. We find that there the discrepancy from rational decision making increases with the sophistication of the rationality criteria, that irrationality concerning fair premium contracts is uncharacteristically high, and that the slope of absolute risk aversion seems to depend on the format of the insurance contract.

An experiment on rational insurance decisions

We analyse optimal pricing and quality of a monopolistic journal and the optimality of open access in a two-sided model. The predominant aspect of the model that determines the quality levels at which open access is optimal is the nature of the (non-linear) externalities between readers and authors in a journal. We show that there exist scenarios in which open access is a feature of high-quality journals. Besides, we find that the removal of copyright (and thus forced open access) will likely increase both readership and authorship, will decrease journal profits, and may increase social welfare.

Optimal Pricing and Quality of Academic Journals and the Ambiguous Welfare Effects of Forced Open Access: A Two-Sided Model

This paper considers a situation in which the outcome of a random variable, x~, must be split between two individuals, but only one of them (the agent) actually observes the true value that the variable takes. The agent reports a value of the variable to the principal, who then either accepts this report and each participant receives a predetermined share of the reported value of x~, or he rejects the report and carries out an investigation into the true value of x~. If the investigation reveals that the agent reported falsely (fraud), then each participant receives a predetermined payoff that depends on both the true value of x~ and the value of x that the agent reported. The paper finds a payoff function for the case of discovered fraud that provides the proper incentives for the agent to always report truthfully independently of his utility function. The model has direct applications for both tax evasion and insurance fraud.

Curtailing Ex-Post Fraud in Risk Sharing Arrangements

Abstract In a multi-period setting that is equivalent to the classic Rothschild–Stiglitz adverse selection situation, we prove that if insurers do not gather information on accidents over time, then the inability to commit to contract renewals is sufficient for the optimal contract sequence to be periodic repetition of the Rothschild–Stiglitz single-period equilibrium.

A theorem on multi-period insurance contracts without commitment

In the vast majority of the literature on the economics of copyright royalties, it is assumed that the copyright holder is remunerated either by a fixed payment or by a payment that amounts to an additional marginal cost to the user, or both. However, in some significant instances in the real-world, copyright holders are constrained to a compensation scheme that involves revenue sharing. That is, the copyright holder takes as remuneration a part of the user’s revenue. In essence, the remuneration is set as a tax on the user’s revenue. This paper analyses such remuneration mechanisms, establishing and analysing the optimal tax rate, and also the Nash equilibrium tax rate that would emerge from a fair and unconstrained bargaining problem. The second option provids a rate that may be useful for regulatory authorities.