Edited by Ruth Towse and Trilce Navarrete Hernández
Chapter 11: Contract theory and information goods
The legal institution of copyright, and the incentive properties of contracts that licence access to information goods are inextricably linked. Contracts for information goods cannot function without copyright. In light of that fact, any incentive for creators that exists is only indirectly related to copyright itself. It is contracts that share money and risk, and that therefore are the source of compensation for creative efforts exerted when information goods are produced. Economics has a long history of studying the incentive mechanisms of contracts, and how contractual terms share risk, provide expected compensation, and resolve problems of asymmetric information. In this chapter the relationship between contracts and copyright is explored, with particular emphasis placed on some of the standard elements of licensing contracts – such as royalty payments that make money transfers contingent upon observable outcomes – using the lens of the economic theory of contracts.
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