Dec 31, 1988
This Note develops an analytic model of the behavior of producers of intellectual property (e.g. books and journals, computer software, pre-recorded videocassettes) when a technology that permits private copying is introduced. The model, which focuses on changes in the price of originals in response to copying, is used to analyze the effect of private copying on the profits of producers and the welfare of consumers. Among the conclusions of the analysis are: (1) Copying can increase producer profits if the technology for producing copies is more efficient than that for producing originals. (2) Copying can reduce the welfare of consumers if the technology available to copiers is less efficient than that available to producers, and publishers find it profitable to raise the price of originals. (3) An inefficient copying technology can benefit consumers if it causes publishers to reduce the price of originals to discourage copying. The results of the analysis suggest that estimates of the harm that results from private copying may be overstated, and that the effect of private copying will vary among types of intellectual property depending on the relative costs of producing originals and copies.