- Author(s): Michael Abramowicz
- Date Posted: 2003
- Law & Economics #: 03-03
- Availability: Full text (most recent) on SSRN
Copyright theorists often observe that copyright law presents tradeoffs between incentives to produce new works and dissemination of existing works. In this Article, Professor Abramowicz points out that a marginal reduction in the number of works produced may enhance social welfare. As the industrial organization literature on product differentiation has long recognized, a potential entrant into an imperfectly competitive market does not take into account any reduction in business that entry will cause existing producers to suffer. As a result, entry may occur even if it reduces social welfare. Concern about the rent dissipation associated with such entry is particularly relevant to markets for copyrighted works, both because copyright inherently involves tradeoffs and because the low cost of reproducing copyrighted works means that marginal entry is less likely to expand the number of consumers whom a market can serve. Rent dissipation concerns, however, need not lead to radical copyright reform. To the contrary, such concerns help explain otherwise puzzling aspects of copyright law, including ways in which copyright is surprisingly narrow and ways in which it is surprisingly broad. For example, rent dissipation theory helps account for both the contours of fair use doctrine and the lengthy copyright term.