Enforcement and Control of Piracy,Copying, and Sharing in the Movie Industry

We review strategies that movie distributors have used to cope with piracy, copying, and sharing of movies in the United States in four categories: “hard goods” commercial piracy, consumer theft of pay TV signals, consumer copying and sharing of videos and pay TV, and (mostly in prospect) Internet file sharing. In the past, distributors have mainly sought to raise costs of engaging in these activities by increasing legal jeopardy, advantaging anti-copy technology, and reducing original sources of supply. They appear to have effectively reduced or contained most piracy, copying, and sharing of movies in the U.S., at least with analog media. Movie distributors are following similar strategies with digital media, including Internet file sharing. Digital media raise the stakes because of lower costs of copying or sharing and higher quality of outputs. Digital outputs are not always as high quality as source originals, however, and digital rights management (DRM) technologies potentially improve distributor control. The movie studios now face technological, demand, and political uncertainties in the U.S., notably in maintaining or achieving technically compatible DRM systems to control file sharing and PPV/VOD copying. Implications for foreign markets and directions for research are discussed. Some sections of this article draw substantially on David Waterman (2005a). Hollywood’s road to riches (Cambridge, MA: Harvard University Press).     

Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales

The growth of Internet-based piracy has led to a wide-ranging debate over how copyright policy should be enforced in the digital era. In this paper we analyze the impact of the US government's shutdown of a major piracy site – Megaupload.com – on digital sales and rentals of movies.Exploiting cross-country variation in pre-shutdown usage of Megaupload, we find that the shutdown of Megaupload and its associated sites caused digital revenues for three major motion picture studios to increase by 6.5–8.5%. Our results suggest that some consumers will turn to legal channels when a major filesharing site is shut down, and by extension that illegal filesharing displaces digital movie sales.     

The broadband bonus: Estimating broadband Internet's economic value

How much economic value did broadband Internet create? Despite the importance of this question for national policy, no research has estimated broadband's incremental contribution to U.S. GDP by calibrating against historical adoption and incorporating counterfactuals. This study provides benchmark estimates for 1999 through 2006 and finds that broadband accounts for $28 billion of the $39 billion observed in 2006. Depending on the estimate, households generated $20-$22 billion of broadband revenue and approximately $8.3-$10.6 billion was additional revenue created between 1999 and 2006. Consumer surplus accounted for $4.8-$6.7 billion of this amount, which is not measured in GDP. An Internet-access Consumer Price Index would have to decline by 1.6-2.2% per year for it to reflect this unmeasured value. These estimates differ from existing benchmarks by an order of magnitude and relate to several policy debates.     

MEASURING THE BUSINESS STEALING,CANNIBALIZATION AND MARKET EXPANSION EFFECTS OF ENTRY IN THE U.S. MOTION PICTURE EXHIBITION MARKET*

Using a large and comprehensive theater level database covering over $18 billion in theater revenues over a five year period, I document the extent and nature of business stealing, revenue cannibalization and market expansion that occurred during the height of the 1990's boom in movie theater construction.     

Sorry Winners

Bidders who receive both “common-value” and “private-value” signals about the value of an auction prize cannot fully infer their opponents’ information from the bidding. So bidders may overestimate the value of the prize and, subsequently, regret winning. When multiple objects are on sale, bidding in an auction provides information relevant to the other auctions, and sequential auctions are more vulnerable to overpayment and winners’ regret than are simultaneous auctions. With information inequality among bidders, the seller’s revenue is influenced by two contrasting effects. On the one hand, simultaneous auctions reduce the winner’s curse of less informed bidders and allow them to bid more aggressively. On the other hand, sequential auctions induce less informed bidders to bid more aggressively in early auctions to acquire information.      

The Year in Economics at the FCC, 2010–11: Protecting Competition Online

The past year in economics at the Federal Communications Commission focused on protecting competition in developing online markets. Our review discusses important economic issues that are raised by the FCC’s Open Internet rulemaking (which is commonly referred to as “net neutrality”) and its review of Comcast’s programming joint venture with General Electric’s NBC Universal affiliate. The Open Internet rule focused on established online markets, while the Comcast/NBCU transaction addressed nascent competition online along with competition in video programming and distribution offline.     

On Retail Gasoline Pricing Websites: Potential Sample Selection Biases and Their Implications for Empirical Research

Station-specific retail gasoline prices are publicly available on websites such as GasBuddy.com, but the potential sample selection biases that might exist in these data have not previously been examined. To this end, two sets of prices were compiled for 27 stations in Guelph, Ontario, in late 2005: an unbalanced panel collected every 12 h from OntarioGasPrices.com, and a balanced panel collected eight times per day by direct observation. It appears that “Internet data” can be reliable for answering questions that require daily, company-operated, major brand station prices, but not if one needs very high frequency data or prices for certain types of independent stations.      

Markets Linked by Rising Marginal Costs: Implications for Multimarket Contact,Recoupment, and Retaliatory Entry

This paper studies the effects on prices and welfare of multimarket contact when firms serve multiple markets from a single facility with rising marginal costs. Here a link is created between markets, even with independent demands: greater output in one market leads to a higher marginal cost and lower output in other markets; and multimarket contact can indeed lower welfare. Variations of the model can explain two other puzzling phenomena: “recoupment” – lower prices in one market “paid for” by higher prices in other markets; and “retaliatory entry” – the credible threat to enter a rival’s market if it enters yours.     

The structure of students’ knowledge and self-concepts. Part A: The structure of students’ knowledge formed in information education

The purpose of this study was to examine the structure of students’ knowledge formed in information education at junior high-school level. Seventy-two 7th graders (first-year junior high-school students) and 78 10th graders (first-year high-school students) participated in the study. A cluster analysis was performed on 40 items of knowledge that was included in “Information and Computers.” The results of the analysis indicated that students’ knowledge composed from the perspective of two clusters: “Practical knowledge” and “Systematic knowledge.” In addition, “Systematic knowledge” was significantly correlated with “Processing ability,” which is one of the subordinates to “the ability of practical use of information.”     

Universal service and the Telecommunications Act of 1996. The fact after the act

Three goals of the 1996 Telecommunications Act are competition, efficiency, and explicit mechanisms to further universal service. The new universal service policies violate these goals. I review the policies (support for highcost and rural areas, low-income subscribers, and educational and medical institutions, and the funding mechanism) and detect the influence of various interest groups and the regulators' desire to protect their policies from public scrutiny. The new policies will require $4–12 billion per year to fund and create inefficiency of $1.2–4.0 billion per year from revenue taxation. A more efficient tax scheme would increase total surplus.     

Bid Coordination in Sponsored Search Auctions: Detection Methodology and Empirical Analysis*

Bid delegation to specialized intermediaries is common in internet ad auctions. When the same intermediary bids for competing advertisers, its incentive to coordinate client bids might alter the functioning of the auctions. This study develops a methodology to detect bid coordination and presents a strategy to estimate a bound on the search engine revenue losses imposed by bid coordination. When the method is applied to data from auctions held on a major search engine, coordination is detected in 55% of the cases of delegated bidding and the search engine's revenue loss ranges between 5.3% and 10.4%.     

Estimating the Demand for Service Bundles under Three‐Part Tariffs

Consumers may face demand uncertainty when choosing a service plan under three‐part tariffs, and preferences for multiple services may be inter‐dependent. To examine such a demand system, we construct a two‐stage discrete/continuous choice model for service bundles, allowing for interactive utility and preference correlations. Implementing a piecewise maximization approach to consumers’ non‐differentiable utility maximization problem, we estimate the model via simulated method of moments. We empirically illustrate the model using data from a Chinese wireless service provider. Our counterfactual analysis shows that the three‐part tariffs with interchangeable units show no significant loss of revenue, compared to existing tariffs.     

Does Buyer Experience Pay Off? Evidence from eBay

This study explores the relationship between buyer experience and final price in Internet auctions for a homogenous product. We find that more experienced buyers are able to purchase a homogenous product at lower prices, on average, compared to relatively less experienced buyers. The findings are robust to how we account for instances when auctions fail to result in a sale or when they end via the “Buy it Now” option. This result supports findings from the experimental auction literature on auction performance and experience using real auction data.     

Recognizing and fostering creativity in technological design education

The importance of creativity in technological design education is now clearly recognized, both in everyday understanding and also in formal curriculum guidelines. Design offers special opportunities for creativity because of the “openness” of problems (ill-defined problems, the existence of a variety of pathways to the solution, the absence of pre-specified “correct” solutions). However, teachers are still confronted by the question of how to specify which designs are creative and why, how to identify where the creative strengths of designs lie so that students can build on these, and what advice to give on how to change designs to make them more creative. There are also still open questions concerning design pedagogy. A “functional” model of creativity offers guidelines for making plain to students what they are expected to achieve with their designs and for diagnosing the creativity of the designs they offer. These yield, in turn, guidelines for design pedagogy.     

Competition and Strategic Budget Choices in the Motion Picture Industry*

In this article, we study the effect of differentiation on firms' optimal investments in advertising and product quality in the specific context of the motion picture industry. To guide our empirical analysis, we develop a stylized model uncovering that competition in advertising is the highest for intermediate levels of horizontal differentiation, while product quality increases monotonically in differentiation. We corroborate our theoretical predictions with a large dataset on the movie industry confirming both the inverted U-shaped relationship between advertising and differentiation, and the monotonically increasing relationship between product quality and differentiation.     

The Design of Advertising Exchanges

Internet advertising exchanges possess three characteristics—fast delivery, low values, and automated systems—that influence market design. Automated learning systems induce the winner’s curse when several pricing types compete. Bidders frequently compete with different data, which induces randomization in equilibrium. Machine learning causes the value of information to leak across participants. Discrimination may be used to induce efficient exploration, although publishers (websites) may balk at participating. The creation of “learning accounts,” which divorce payments from receipts, may be used to internalize learning externalities. Under some learning mechanisms the learning account eventually shows a surplus. The solution is illustrated computationally.     

How do Brands’ “Own Generics” Affect Pharmaceutical Prices?

This paper examines the price effects of generic drugs that are produced by brand-name drug firms and that are labeled, priced, and marketed to compete against independent generics. The strategy of introducing such “pseudo-generics” – also known as “authorized generics” – has raised some antitrust concerns. One defense of this strategy has been that the additional competition created by pseudo-generics should lead to lower prices. This paper develops a simple model to show that pseudo-generics can be expected to have exactly the opposite effect. It then examines empirical evidence on this point from the Canadian pharmaceutical market, showing that there appears to be a positive relationship between drug prices and the share of generic sales made by the brand’s own pseudo-generic.     

The Year in Economics at the FCC: A National Plan for Broadband

The past year in economics at the Federal Communications Commission (FCC) has focused on encouraging the adoption and deployment of high capacity Internet access and the associated networks, commonly termed “broadband.” Our article sketches important economic themes in the FCC’s National Broadband Plan to show how the application of basic principles of regulatory economics takes account of rapid technological change. We discuss natural monopoly regulation, externalities and cross-subsidies, network effects and interconnection, the allocation of scarce inputs, protecting and fostering competitive markets, and consumer protection and transparency as they apply to the development of broadband.     

Antitrust and Vertical Integration in “New Economy” Industries with Application to Broadband Access

Whether the firms that supply Internet hardware and software should face restrictions on the use of their property is an important and controversial policy issue. Advocates of “net neutrality”—including President Obama and the current FCC majority—believe that owners of broadband distribution systems (hardware used to distribute Internet and video services) and producers of certain “must-have” video content should be subject to prophylactic regulation that transcends present-day antitrust law enforcement. In the economic terms that are used in debates on competition policy, the concern is with vertical integration that may give firms both the opportunity (through denial of access or price discrimination) and incentive (increased profit) to restrict competition. This paper’s central point is that virtually every production process in the economy is vertically integrated, and economics predicts changes in the extent of vertical integration—that is, changes in the boundaries of the firm—in response to changes in relative prices, technology, or institutions. Both vertical integration and changes in the extent of vertical integration are benign characteristics of efficient, dynamic, competitive markets. While there is no shortage of theoretical models in which vertical integration may be harmful, most such models have restrictive assumptions and ambiguous welfare predictions—even when market power is assumed to be present. Empirical evidence that vertical integration or vertical restraints are harmful is weak, compared to evidence that vertical integration is beneficial—again, even in cases where market power appears to be present. Thus, it is reasonable to conclude that prophylactic regulation is not necessary, and may well reduce welfare. Sound policy is to wait for ex post evidence of harm to justify interventions in specific cases. Net neutrality, recently enacted by the FCC but subject to judicial review, is an unfortunate idea.     

“Crafts and technology” and “technical education” in Austria

In Austria, the syllabus for “Technisches Werken/Crafts and Technology” for all types of school in general education was issued more than 30 years ago. The authors believed that it might lay the foundations for technical literacy. The paper is about how the situation of the subject and, with it, technical education has developed since then in Austria. After a brief account of the origin and further development of the carrier subject “Technische Erziehung”/Technical Education various aspects of the present situation of “Technisches Werken/Crafts and Technology” from early years education up to general education are highlighted: the structure and contents of the subject between architecture, design and technology; its significance and the chances of the subject in Austrian schools; the training of the subject teachers. This is followed by the interpretation of a survey of the understanding Austrian pupils have of technology and gender, which was carried out within the framework of the UPDATE-project. The central issues of this study are concerned with pupils’ general awareness of the most important school subjects in primary and secondary schools, specifically of the subject “Crafts and Technology” and of the connection between “Crafts and Technology”, technology and technical occupations.