numerous seminars, and two anonymous referees for helpful comments. This project would not have been possible without the assistance of several individuals and organizations. MixMasterFlame and the FlameNap network shared P2P data with us, and BigChampagne LLC, the CMJ Network, Nathaniel Leibowitz, and Nevil Brownlee generously provided auxiliary data. We thank Keith Ross and David Weekly for assistance in understanding the KaZaA, OpenNap, and WinMX search protocols and database indices. Sarah Woolverton and Christina Hsiung Chen

Today most newly created textual, photographic, audio, and video content is available in digital form. Even older content that was not "born digital " can relatively easily converted to machine-readable formats. At same time, the world has become more networked, making it easy to transfer digital content from one person to another. The combination of technological progress in both digitization and computer networking has been a challenge for traditional ways of managing intellectual property. Some observers have even questioned whether current models for intellectual property can or should survive in a digital world. For example, there is widespread concern about piracy of popular music and film, both via the network and via bootleg CDs and DVDs. There is also concern about the economic viability of the current model for scholarly publication, or, for that matter traditional forms of publishing such as newspapers and TV network news. These developments have led to a revival of interest in the economics of copying and copyright. 1 In this brief review we examine some of the economic issues in this area, and describe some of the insights that have emerged from this work. We end with some

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Abstract: Digital products have the property that they can be copied almost costlessly. This makes them candidates for non-commercial copying by final consumers. Because the copy of a copy typically does not deteriorate in quality, copying products can become a wide-spread phenomenon – this can be illustrated by the surge of file-sharing networks. In this paper we provide a critical overview of the literature that addresses the economic consequences of end-user copying. We conclude that some models with network effects are well-suited for the analysis of software copying while other models incorporating the feature that copies provide information about the originals may be useful for the analysis of digital music copying.

In a socially controlled system it is the participants themselves who are responsible for cooperatively maintaining the security, as opposed to leaving security issues to some external or global authority. Studying the group behaviour that arises from completely local interactions of agents, enables us to find criteria for individual behaviour that creates systems that can identify malicious agents and reduce their damage to the system. In systems where anonymity is easily achieved, the social behaviour can be the force that promotes the establishment of identity. Identity is an important factor that makes economic markets work. Reputation, coupled to voluntarily used electronic identities, is suggested as a way to let systems selforganize into identity preserving systems that support commerce. This is based on simulations of market models, and reasoning about the economic incentives involved for the different social mechanisms. Analyzing complex systems by the use of computer simulations proves to be a feasible method for finding high-level properties, the emergent effects, of a system with local behavior rules.

Technologies for reproducing and redistributing digital goods have made it more difficult to earn profits from their sale, leading to concerns that socially valuable digital products with non-convex production technologies may not be brought to market. However, digital

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Forthcoming, Review of Industrial Organization (special issue on the motion picture industry) 1 Some sections of this article draw substantially on David Waterman (2005a). Hollywood’s Road to Riches (Cambridge, MA: Harvard University Press). 1 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.

This paper analyzes the causes of illegal copying and its effects in the software market across 66 countries. By studying the aggregated and joint effects of different variables, the analysis shows that supply constraints in the software market, shortage of after-sale support, and characteristics legal framework are major drivers of illegal copying when controlling for income per capita. It also concludes there is enough evidence to show there is a threshold of illegal copying over which its aggregated effect on the software market is positive, and this is an efficient mechanism for market creation. Thus, allowing illegal copying in some countries and at certain periods of time may be a profit generating decision in the long-term, especially in countries with low-developed software markets and with presence of Open Source software. For other hand, the results provide evidence to understand why proprietary software companies would prefer enforcing their copyrights and intellectual property rights contingently and as result of a rational decision-making process.

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