If that were actually RIAA's argument then I would agree with you. But their argument is simply that they are losing money to piracy. Not that their decrease in profits is completely due to piracy.
Well, some people do buy the CD as an object (to have the liner notes, artwork, etc). But let's go with what you say, that you just want the music.
I guess my point is that even if you are playing the CD at a park, while other people are able to listen to it, they are not able to then take it home and listen to it elsewhere. In that sense, unlike knowledge, it is not a public good. If you tell me a fact I can store it in my head and it serves its same purpose. However, once the music stops the only thing the listner can do is replay it in their own head. Whether or not those are the same things (fact vs music; original play from CD vs replay in head) is up for debate, I suppose.
Okay, hold on I have to go back and read the earlier posts....
You are simply saying that the music (because of technology) is no longer a private good but is now a public good. Correct? Okay, fine I'll agree 100% and that makes more sense than the "playing the cd in the park" example. But my question then is, so? The law seeks to keep it as a private good. And the law is failing. Hmmmm, I'm not sure where this is getting us other than to the conclusion that the law can't keep up with people's efforts to circumvent it. Is there something more significant I'm missing?
As for the Shapiro & Katz, is that url supposed to be http://econpapers.hhs.se/? Info Econ isn't my prime field so I'm not totally up on it. Obviously I've taken a ton of IO and I have taught IO (undergrad), but my research is Enviro and IO. Looking at the effects of regulations on market structure sort of thing. But info econ is so fascinating.
I briefly scanned through your analysis and my immediate comments were these:
(i) You are grouping very disparate industries. There is no reason to think that some of them ought to behave similarly no matter the economic conditions. For instance, in some other post someone compared the decrease in sales of CDs to the decrease in sales of cars. This is a ridiculous comparison as autos are a durable good and CDs are not, autos costs tens of thousands of dollars while CDs tend to cost less than 20 dollars, etc etc. Likewise, there is no reason to think one ought to compare the RIAA companies to GM, GE, Citibank, Merck, and Dupont (just to grab a few names).
(ii) Nowhere in here is there an estimation of what actually affects the demand for pre-recorded CDs. That demand estimation is what really needs to be done to get a better understanding of how much piracy affects the RIAA's profits. That way you could ask the truly relevant question: "How much would RIAA's profits be if there were no piracy?"
Valiant effort though. And I have to say that the kind of analysis I'm talking about is beyond me as well, really. Although I'll have to do a little searching to see if anyone else has done it.
Re:My theory - perfect information
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RIAA vs The Economy
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· Score: 2, Informative
I'm going to try to reply to both of the above posts (santos's and dyoo's).
For starters, the market for pre-recorded CDs is nowhere near perfectly competitive. But this only applies to the big 5's ability to manipulate prices in their market, over which the FTC recently took them to court.
Second, the issue of rivalry and exclusivity refers to the CD as an object. It is rival in that if I purchase it you cannot also purchase it (though we may purchase it and listen to it together). It is excludable in that the seller can keep you from getting the good without paying for it. The issue is not whether or not you can get your own copy, but whether any one copy of the CD is rival and/or exclusive.
The classic example of a public good (non-rival, non-exclusive) is a lighthouse. As the lighthouse gives off light, any one ship taking advantage of that light does not take anything away from anyone else using it (non-rival), and the operator of the lighthouse has no means by which to exclude any one individual from taking advantage of the light (non-exclusive). A CD in no way fits this description. And there are no markets, perfectly competitive or not, for public goods.
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If that were actually RIAA's argument then I would agree with you. But their argument is simply that they are losing money to piracy. Not that their decrease in profits is completely due to piracy.
Well, some people do buy the CD as an object (to have the liner notes, artwork, etc). But let's go with what you say, that you just want the music.
I guess my point is that even if you are playing the CD at a park, while other people are able to listen to it, they are not able to then take it home and listen to it elsewhere. In that sense, unlike knowledge, it is not a public good. If you tell me a fact I can store it in my head and it serves its same purpose. However, once the music stops the only thing the listner can do is replay it in their own head. Whether or not those are the same things (fact vs music; original play from CD vs replay in head) is up for debate, I suppose.
Okay, hold on I have to go back and read the earlier posts....
You are simply saying that the music (because of technology) is no longer a private good but is now a public good. Correct? Okay, fine I'll agree 100% and that makes more sense than the "playing the cd in the park" example. But my question then is, so? The law seeks to keep it as a private good. And the law is failing. Hmmmm, I'm not sure where this is getting us other than to the conclusion that the law can't keep up with people's efforts to circumvent it. Is there something more significant I'm missing?
As for the Shapiro & Katz, is that url supposed to be http://econpapers.hhs.se/? Info Econ isn't my prime field so I'm not totally up on it. Obviously I've taken a ton of IO and I have taught IO (undergrad), but my research is Enviro and IO. Looking at the effects of regulations on market structure sort of thing. But info econ is so fascinating.
Ooh, gotta go. UEFA Cup final is on.
Just from an economist's point of view....
I briefly scanned through your analysis and my immediate comments were these:
(i) You are grouping very disparate industries. There is no reason to think that some of them ought to behave similarly no matter the economic conditions. For instance, in some other post someone compared the decrease in sales of CDs to the decrease in sales of cars. This is a ridiculous comparison as autos are a durable good and CDs are not, autos costs tens of thousands of dollars while CDs tend to cost less than 20 dollars, etc etc. Likewise, there is no reason to think one ought to compare the RIAA companies to GM, GE, Citibank, Merck, and Dupont (just to grab a few names).
(ii) Nowhere in here is there an estimation of what actually affects the demand for pre-recorded CDs. That demand estimation is what really needs to be done to get a better understanding of how much piracy affects the RIAA's profits. That way you could ask the truly relevant question: "How much would RIAA's profits be if there were no piracy?"
Valiant effort though. And I have to say that the kind of analysis I'm talking about is beyond me as well, really. Although I'll have to do a little searching to see if anyone else has done it.
I'm going to try to reply to both of the above posts (santos's and dyoo's).
For starters, the market for pre-recorded CDs is nowhere near perfectly competitive. But this only applies to the big 5's ability to manipulate prices in their market, over which the FTC recently took them to court.
Second, the issue of rivalry and exclusivity refers to the CD as an object. It is rival in that if I purchase it you cannot also purchase it (though we may purchase it and listen to it together). It is excludable in that the seller can keep you from getting the good without paying for it. The issue is not whether or not you can get your own copy, but whether any one copy of the CD is rival and/or exclusive.
The classic example of a public good (non-rival, non-exclusive) is a lighthouse. As the lighthouse gives off light, any one ship taking advantage of that light does not take anything away from anyone else using it (non-rival), and the operator of the lighthouse has no means by which to exclude any one individual from taking advantage of the light (non-exclusive). A CD in no way fits this description. And there are no markets, perfectly competitive or not, for public goods.
Just a little econ lesson from an econ prof.