Engel and Kurschilgen (2010)

Source Details

Engel and Kurschilgen (2010)
Title:	Fairness Ex Ante and Ex Post: Experimentally Testing Ex Post Judicial Intervention into Blockbuster Deals
Author(s):	Engel, C., Kurschilgen, M. J.
Year:	2010
Citation:	Engel, C., & Kurschilgen, M. J. (2011). Fairness Ex Ante and Ex Post: Experimentally Testing Ex Post Judicial Intervention into Blockbuster Deals. Journal of Empirical Legal Studies, 8(4), pp682-708
Link(s):	Definitive , Open Access
Key Related Studies:	Watt (2006) Skinner (2006) Davies (2006)
Discipline:	D81: Criteria for Decision-Making under Risk and Uncertainty O34: Intellectual Property and Intellectual Capital O38: Government Policy
Linked by:

About the Data
Data Description:	This research was conducted with the experimental software z-Tree. Student subjects were randomly invited from a subject pool of approximately 3500 participants. 48 student subjects from different majors participated, 27% of which were female. Before every treatment participants received paper instructions and answered a set of control questions. Sessions lasted about one and a half hours. In addition to the earnings that depended on their performance in the experiment, participants received a show-up fee of 2 €. On average, participants earned 12.26 €, with 5.34 € from the baseline (6.04 € for buyers and 4.66 € for sellers), and 4.91 € from the P-treatment (5.13 € for buyers, 5.60 € for sellers, 4 €- fix - for umpires).
Data Type:	Primary data
Secondary Data Sources:
Data Collection Methods:	Experimental (Laboratory)
Data Analysis Methods:	Descriptive statistics (counting; means reporting; cross-tabulation) Correlation and Association Multivariate Statistics
Industry(ies):	Film and motion pictures
Country(ies):	Germany
Cross Country Study?:	No
Comparative Study?:	No
Literature review?:	No
Government or policy study?:	No
Time Period(s) of Collection:	April 2009
Funder(s):

Abstract

"The market for copyrights is characterised by a highly skewed distribution of profits: very few movies, books and songs generate huge profits, whereas the great bulk barely manages to recover production cost. At the moment when the owner of intellectual property grants a licence (“ex ante”), neither party knows the true value of the traded commodity. A seemingly odd provision from German copyright law, the so-called “bestseller paragraph”, stipulates that the seller of a licence has a legally enforceable right to a bonus in case the work (“ex post”) turns out a blockbuster. We experimentally explore the effect of the provision on market prices, on the number of deals struck and on perceived fairness. Our results show that the provision leads to lower prices for copyrights. More copyrights trade. The buyers express less ex-post discontent."

Main Results of the Study

The study examines the exisence of the German "bestseller clause" which permits authors to a bonus "ex-post" should their work become succesful (a feat which could not be determined during ex-ante licensing negotiations):• Such a provision increases perceived fairness for buyers although not for sellers. Nonetheless, the provision of this clause increases the likelihood of concluding a deal, which the author's ascribe to the increased willingness of authors to accept low offers (being reassured by the presence of the clause, should their work go on to be successful). Consequently, the existence of this clause leads to lower prices for copyright, in turn accelerating trade. • The presence of a bestseller clause reduces buyers’ ex-post discontent (due to the acceptability of low offers) but does not affect sellers’ feelings of perceived ex-post fairness (seemingly never present in the first place should the work eventually go on to be high-value). This is so even where "umpires" (third parties representing the judiciary) split ex-post gains equally, even though arguably the buyer bears all the risk (in effect insuring the seller).• The study concludes that the presence of a bestseller clause is "beneficial for sellers, buyers and society", being economically beneficial and matching perceived fairness.

Policy Implications as Stated By Author

Whilst the study does not make any explicit policy recommendations, the presence of a "bestseller clause" apparently "restores fairness" in highly-skewed and unpredictable markets (where few works are highly successful).

Coverage of Study

Coverage of Fundamental Issues

Issue	Included within Study
Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare
Relationship between creative process and protection - what motivates creators (e.g. attribution; control; remuneration; time allocation)?
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)
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)

Datasets

Sample size:	48
Level of aggregation:	University students
Period of material under study:	April 2009