Durham, Hirshleifer, Smith (1998)

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1. Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare 2. Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)? 3. Harmony of interest assumption between authors and publishers (creators and producers/investors) 4. Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption) 5. Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)

A. Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right) B. Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction) C. Mass digitisation/orphan works (non-use; extended collective licensing) D. Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability) E. Fair remuneration (levies; copyright contracts) F. Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)

Source Details

Durham, Hirshleifer, Smith (1998)
Title: Do the Rich Get Richer and the Poor Poorer? Experimental Tests of a Model of Power
Author(s): Yvonne Durham, Jack Hirshleifer, and Vernon L. Smith
Year: 1998
Citation: Durham, Yvonne, Jack Hirshleifer, and Vernon L. Smith. Do the rich get richer and the poor poorer? Experimental tests of a model of power. The American Economic Review 88.4 (1998): 970-983.
Link(s): Definitive
Key Related Studies:
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About the Data
Data Description: 24 experiments featuring 279 individual subjects
Data Type: Primary data
Secondary Data Sources:
Data Collection Methods:
Data Analysis Methods:
Industry(ies):
Country(ies):
Cross Country Study?: No
Comparative Study?: Yes
Literature review?: No
Government or policy study?: No
Time Period(s) of Collection:
  • 1998
Funder(s):

Abstract

In a market economy, there is no clear implication as to whether economic activities will tend to reduce or else to widen initial wealth disparities. When it comes to political or military struggles, in contrast, it might be expected that initially stronger or richer contenders would grow ever stronger and richer still. What has been termed the Paradox of Power (Hirshleifer, 1991) is the observation that very often the reverse occurs: poorer or weaker contestants improve their position relative to richer or stronger opponents. In warfare, small nations have often defeated larger ones, as notably occurred in Vietnam. Individuals, groups, or nations - if rational and self-interested - will equalize the marginal returns of two main ways of generating income: production and mutually advantageous exchange, versus appropriate efforts designed to redistribute income or capture resources previously controlled by other parties.

Main Results of the Study

We tested two main kinds of predictions: ( 1 ) The first group dealt 'with issues common to much of the game-theoretic and experimental literature. Of these, the major question was the degree to which the experimental outcomes approximated the noncooperative Nash solution, as opposed to a more cooperative outcome generating a larger in- come for the group as a whole. We also compared protocols with randomly varying partners each round as opposed to fixed partners over the entire sequence of play. (2) The second group of predictions dealt with inferences from the specific model of conflict in Hirshleifer ( 1991 ), and specifically those associated with the Paradox of Power. The paradox is that, in many situations, an initially poorer side will end up gaining in relative position in comparison with an initially richer and thus stronger opponent. With regard to the first group of predictions, the experimental observations overwhelmingly supported the Nash as opposed to the Cooperative solution. However, while the Nash solution is much better supported in a dichotomous comparison between the two, the experimental results typically displayed some degree of slippage in the direction of cooperation. The convergence toward Nash was weaker under the fixed partners as opposed to the varying partners protocol, and also was weaker in the mature (sixteenth round) choices than the overall behavior. Together with an observed tendency toward positive correlation of the deviations from the Nash equilibrium, these results are consistent with a "leaming to cooperate" interpretation. Fixed partners over multiple rounds of interaction favor the development of mutual understanding relative to varying partners. Still, we must reemphasize, overall the results were dominated by noncooperative (Nash) behavior.

Policy Implications as Stated By Author

  • Decision-makers (individual actors or firms) must make a decision between two classes of economic activities: production or conflict
  • Decision-makers tend towards either a co-operative or non-cooperative model
  • In the case of new technologies and business models this can effect change to the existing power structure, particularly if the Paradox of Power comes into play (where paradoxically the weaker side will overcome the stronger side)

Coverage of Study

Coverage of Fundamental Issues
Issue Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Green-tick.png
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
Green-tick.png
Harmony of interest assumption between authors and publishers (creators and producers/investors)
Effects of protection on industry structure (e.g. oligopolies; competition; economics of superstars; business models; technology adoption)
Understanding consumption/use (e.g. determinants of unlawful behaviour; user-generated content; social media)
Coverage of Evidence Based Policies
Issue Included within Study
Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right)
Exceptions (distinguish innovation and public policy purposes; open-ended/closed list; commercial/non-commercial distinction)
Mass digitisation/orphan works (non-use; extended collective licensing)
Licensing and Business models (collecting societies; meta data; exchanges/hubs; windowing; crossborder availability)
Green-tick.png
Fair remuneration (levies; copyright contracts)
Enforcement (quantifying infringement; criminal sanctions; intermediary liability; graduated response; litigation and court data; commercial/non-commercial distinction; education and awareness)
Green-tick.png

Datasets

Sample size: 279
Level of aggregation: Individual
Period of material under study: 1998