Handbook of Cultural Economics, Third Edition
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Handbook of Cultural Economics, Third Edition

Edited by Ruth Towse and Trilce Navarrete Hernández

Cultural economics has become well established as a subject of interest for students and teachers of courses ranging from economics to arts administration as well as for policy-makers and practitioners in the creative industries. Digitisation has had a tremendous impact on many areas of the creative economy and the third edition of this popular book fully reflects it.
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Chapter 11: Contract theory and information goods

Richard Watt


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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