"Efficient Contracts for Digital Content"

Tobias Regner

This paper analyses efficient contracts for digital content, focusing on the
music industry. It offers three contract cases for analysis: strong copy protection,
a strategically low price and voluntary reciprocal contributions.
Insights from the economics of information and behavioural economics —
information goods have public goods properties; social preferences are significant
among individuals — are applied to examine the value of a strict copyright
enforcement in the digital age.
We find that endogenous incomplete contracts based on fair, reciprocal behaviour
may achieve a first-best allocation of information goods, while complete
contracts are limited to second-best results.