The purpose of this thesis is to develop a qualitative understanding of the impact of peer-based free exchanges on the social and economic value of information goods, and use that to develop a sustainable online business model for information goods industries. There are a number of studies that have been conducted on MP3 usage, peer-based systems, Internet usage and other related topics, and the most relevant statistics are presented here to provide a context for the specific issues examined. In addition, primary data has been collected through 23 interviews with executives, technologists and end users, 206 questionnaires from end users, and 1141 Internet questionnaires.
The paper consists of 5 main chapters and two appendices. The first chapter introduces a definition for the concept of information goods, and briefly surveys the relevant legislation and case law which is relevant to their protection under copyright. Understanding the requirements and limits of the law is crucial to the development of a viable business strategy in any area – but it’s one of the principle considerations for information goods industries. The second chapter examines consumer behavior, and describes the modalities related to the sharing of information goods that myself and others have observed in the last 15 years in various segments of the population. The third chapter describes the recording industry, which is studied in depth. Its history, value chain, key players and statistics are presented and analyzed. The fourth chapter presents the primary data collected through the administered survey, and analyzes its meaning and implications with the benefit of the opinions collected through direct interviews. The questionnaire itself, as well as a group of representative anecdotal feedback, is presented in Appendix A. The fifth chapter proposes a new online business model for information goods industries, using the music industry as the primary example. It consists of a sequence of prescribed measures, and analysis is presented to argue why such a model, and only such a model, will be successful in the short run and sustainable in the long run.
I study firms' behaviour in markets where firms' long-run capacity decisions, made in the presence of uncertain demand, constrains short-run competition. In Chapter 2, I analyse firms' investment and pricing incentives in a differentiated products framework with uncertain demand. Firms choose production capacities before observing demand and choose prices after demand is realised. Unlike previous models, when firms are identical, symmetric pure-strategy equilibria exist, even in the presence of very low capacity costs.
Financial crises often involve amplification effects whereby adverse developments in financial markets and in the real economy mutually reinforce each other. The literature in macroeconomics has typically emphasized the following four elements to describe financial amplification effects: 1 First, individual agents face financial constraints that limit their economic activity, e.g. by constraining the amount of funds available for investment. Second, the aggregate level of economic activity affects the price of productive assets in the sector. Third, the price of productive assets determines the net worth of individual agents who own them. Fourth, net worth governs the tightness of their financial constraints by affecting the availability or price of external finance. This reduces economic activity further, which in turn depresses asset prices further and so on, leading to a self-reinforcing cycle of falling asset prices, deteriorating net worth, tightening financing conditions, and declining economic activity.
A shock to any of the four elements involved – financing capacity, economic activity, asset prices, or net worth – can trigger amplification effects when financing constraints are binding. For example, a negative shock to the net worth of financial institutions can trigger sharp declines in their financing capacity, their lending activity, the financial health of their borrowers and hence the value of their loan portfolio, and their net worth. 2 Financial crises entail large welfare costs and are therefore of great concern to both economists and policymakers. Every financial crisis – including the current subprime crisis – therefore brings up the question of whether exisiting regulations are sufficient or new regulations to limit risk-taking by financial market participants are desirable.
