Designing markets for co-production of digital culture goods

  • Authors:

  • Karl R. Lang;Richard D. Shang;Roumen Vragov

  • Affiliations:

  • Zicklin School of Business, Baruch College, City University of New York (CUNY), New York City, NY 10010, USA;Zicklin School of Business, Baruch College, City University of New York (CUNY), New York City, NY 10010, USA;Zicklin School of Business, Baruch College, City University of New York (CUNY), New York City, NY 10010, USA

  • Venue:
  • Decision Support Systems
  • Year:
  • 2009

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Abstract

Digital culture products are easily reproduced, easily distributed, and subject to boundless modification, extension and recombination. This sets the stage for the emergence of markets for co-production of cultural content. This paper studies two new market structures using two different licensing arrangements. First, we consider a consumer market that offers products with content access and content transmutation rights allowing consumers to co-create content products. Second, we consider a sourcing market where producers can trade content access and transmutation rights and thus license content for reuse in production processes. We present experimental findings that show that under both proposed licensing arrangements total surplus is larger than in the baseline case without tradable transmutation rights. The presence of transmutation rights diffuses monopoly power without hurting producers' profits. Our findings also suggest that transmutation-based co-production models can serve as an efficient mechanism for producing for the long tail in cultural content goods segments. In addition to our empirical findings, the paper also contributes a basic experimental framework and market design model that can be readily applied for testing other content licensing arrangements.