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Monday, May 26, 2014

'Behavioural Artists and Piracy'

Joshua Gans:

Behavioural artists and piracy: Piracy is everywhere... There is evidence that piracy has reduced straight-up music sales revenue but overall it is unclear whether digitization has impacted adversely on artist returns (because they make up losses with concert revenue and the like) or through lower distribution costs. But when it comes to piracy or music sharing, in general, Joel Waldfogel has convinced me that artists’ incentives to enter and supply quality music hasn’t been harmed and may have even been improved. ...
Today I have released a new NBER Working Paper (or here for the SSRN version) that tries to reconcile these ‘stylised facts’: namely, that artists seem to care about money yet entry incentives haven’t been harmed by piracy. To do this, I assume that artists themselves do not act strictly rationally and are instead time inconsistent in a manner familiar to behavioural economics. Put simply, if music artists aren’t hyperbolic discounters I’m not sure who would be. ...[explains theory]...
Of course, it is just a theory and  it is not clear whether it plays a real role or not but it does suggest that our welfare concerns about piracy would be lower than a model with perfectly rational artists would predict. The paper also considers the role of publisher contracts in mediating these outcomes but that doesn’t change things too much.

    Posted by on Monday, May 26, 2014 at 09:44 AM in Economics, Market Failure | Permalink  Comments (13)

          


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