Private Copying, Appropriability, and Optimal Copying

This report analyzes the economic effects of the reproduction of intellectual property, i e., books, journals, computer software, and audiovisual materials. A general economic model is presented in which direct appropriability (the marginal cost of copying is constant) and indirect appropriability (the marginal cost of copying is rising) appear as particular outcomes arising from particular assumptions regarding the marginal costs of copying. The model focuses on two aspects of private copying: the extent to which originals and copies are substitutes for consumers, and the technology for making copies from originals. Variants of the basic model, each of which is defined by a characterization of copying technology and substitutability, are examined in three cases. The model is then applied to the proble', of determining the royalties to be charged for making copies. The analysis in this report indicates that the effects of private copying differ considerably depending on the assumptions regarding the substitutability between originals and copies and the relative casts of producing copies and originals, which has important implications for the appropriate public policy to Fursue regarding such copying. (21 references) (CGD