Joel Waldfogel
Current Projects and Working Papers
August 2007
I have recently finished a book, The Tyranny of the Market: Why You Can’t Always Get What You Want. More information on that here.
Most of my recent work falls into two broad areas, intellectual property
piracy and the effects of agglomeration on product availability. I’m also working on a few other
things. Abstracts of current and recent work
appear below with links to the papers.
Papers
1. Intellectual Property Piracy
Television
In the past few years, YouTube and other sites for sharing video files over the Internet have vaulted from obscurity to places of centrality in the media landscape. The files available at YouTube include a mix of user-generated video and clips from network television shows. Networks fear that availability of their clips on YouTube will depress television viewing. But unauthorized clips are also free advertising for television shows. As YouTube has grown quickly, major networks have responded by making their content available at their own sites. This paper examines the effects of authorized and unauthorized web distribution on television viewing between 2005 and 2007 using a survey of Penn students on their tendencies to watch television series on television as well as on the web. The results provide a glimpse of the way young, Internet-connected people use YouTube and related sites. While I find some evidence of substitution of web viewing for conventional television viewing, time spent viewing programming on the web – 4 hours per week – far exceeds the reduction in weekly traditional television viewing of about 25 minutes. Overall time spent on network-controlled viewing (television plus network websites) increased by 1.5 hours per week. See the paper.
Movies
New information technology has reduced marginal production and distribution
costs of information goods to negligible levels and promises to revolutionize
many industries. Unpaid copies of digital products can be as good as paid
first-generation copies, and their availability can undermine the ability of
sellers to cover first-copy costs. As a result, unpaid distribution has emerged
as a major issue facing the music and movie industries in the past few years.
Using survey data on movie consumption by about 500
Music
Recording industry revenue has fallen sharply in the last three years, and some - but not all - observers attribute this to file sharing. We collect new data on albums obtained via purchase and downloading, as well as the consumers' valuations of these albums, among a sample of US college students in 2003. We provide new estimates of sales displacement induced by downloading using both OLS and an instrumental variables approach using access to broadband as a source of exogenous variation in downloading. Each album download reduces purchases by about 0.2 in our sample, although possibly much more. Our valuation data allow us to measure the effects of downloading on welfare as well as expenditure in a subsample of Penn undergraduates, and we find that downloading reduces their per capita expenditure (on hit albums released 1999-2003) from $126 to $100 but raises per capita consumer welfare by $70. The paper, joint with Rafael Rob, appeared in a file-sharing symposium in the Journal of Law & Economics in 2006.
2. Agglomeration and Product Availability
" The Median Voter and the Median Consumer"
When a product's product provision entails fixed costs, it will be made available only if a sufficient number of people want it. Some products are produced and consumed locally, so that provision requires not only a large group favoring the product but a large number nearby. Just as one has an incentive to sort into community whose median voter shares his preferences for local public goods, product markets may provide an analogous incentive to sort into a community whose consumers tend to share his preferences in private goods. Using zip code level data on chain restaurants and restaurants overall, this paper documents how the mix of locally available restaurants responds to the local mix of consumers, with three findings. First, based on survey data on chain restaurant patronage, restaurant preferences differ substantially by race and education. Second, there is a strong relationship between restaurants and population at the zip code level, suggesting that restaurants’ geographic markets are small. Finally, the mix of locally available chain restaurants is sensitive to the zip code demographic mix by race and by education. Hence, differentiated product markets provide a benefit -- proximity to preferred restaurants -- to persons in geographic markets whose customers tend to share their preferences. This paper is forthcoming in the Journal of Urban Economics.
“Who Benefits Whom in the Neighborhood? Demographics and
Retail Product Geography” (prepared for an NBER Volume on the
Economics of Agglomeration)
Because
of fixed costs, additional people nearby confer a benefit on each other by
helping to make more retail products available. Yet, because product
preferences differ across groups of consumers, the appeal of what’s
available depends on the mix of consumers. If product preferences relate to
consumer characteristics such as race, income, age, and ethnicity, then product
availability will be stimulated by concentration of like individuals. The
sensitivity of product availability to demographic mix of consumers has been
documented for metropolitan-area products, such as newspapers, radio, and
television, as well as one neighborhood-level product, restaurants. Here I
revisit the question for a broader group of local retail establishments. Using
the Consumer Expenditure Survey, I document that preferences differ across
groups. Then, using the 2000 Census and the 2000 Zip code Business Patterns, I
show that the mix of products available is sensitive to the mix of local
preferences. People therefore derive benefit through the product market from
agglomerating with persons with similar product preferences, and this may help
to explain patterns of residential segregation.
Other Live Projects
Since the dawn of broadcasting, and especially in the past decade, Americans
have turned their attention from local to distant sources of news and
entertainment. Television and national
media generally are often thought to undermine civic engagement, transforming
locally engaged citizens into viewers consuming programming from
distant sources. Yet, some television,
notably news programming, originates locally, raising the possibility that some
kinds of television programming may promote civic engagement. While US broadcast regulation has
traditionally promoted localism without articulating its meaning. In
this paper we propose a simple test for the importance of localism, whether the
presence of local television news affects local civic behavior. Although the ubiquity of local
television news programming areas makes it impossible to study its effects on
general populations, Spanish-language local television news programming was
available in only about 25
4. "Close to You?
Bias and Precision in Patent-Based Measures of Technological Proximity"
(with Mary Benner)
Patent data have been widely
used in research on technological innovation to characterize firms’
locations as well as the proximities among firms in knowledge space.
Researchers could measure proximity among firms with a variety of measures
based on patent class data, including Euclidean distance, correlation, and
angle between firms’ patent class distributions. Alternatively, one could
measure proximity using overlap in cited patents. We point out that measures of
proximity based on small numbers of patents are imprecisely measured random
variables. Measures computed on samples with few patents generate both biased
and imprecise measures of proximity. We explore the effects of larger sample
sizes and coarser patent class breakdowns in mitigating these problems. Where
possible, we suggest that researchers increase their sample sizes by
aggregating years or using all of the listed patent classes on a patent, rather
than just the first.
5. Product Quality and Market Size.
When quality is produced with fixed costs, a high quality firm can undercut its rival’s prices and may find it profitable to invest more in quality as market size grows large. As a result, a market can remain concentrated even as it grows large. When quality is produced with variable costs, by contrast, a wide range of product qualities can coexist in the market because they are offered at different prices. Larger markets will fragment and offer products with a wider range of qualities Using US urban areas as markets, we examine the relationships between market size and product quality - and between market size and product concentration - for two industries that differ in their quality production process. We document that in the restaurants industry, where quality is produced largely with variable costs, the range of qualities on offer increases in market size, with each product maintaining a small market share. In daily newspapers, where quality is produced with fixed costs, the average quality of products increases with market size, and the market does not fragment as it grows large. See the paper, Product Quality and Market Size (joint with Steve Berry).
6. Social Learning in High Stakes Games
We analyze the behavior of game-show contestants who play a one-shot game called Friend or Foe. While it is a weakly dominant strategy not to cooperate, almost half the contestants on the show choose to play “friend.” Remarkably, the behavior of contestants remains unchanged even when stakes are very high, ranging from $200 to more than $10,000. We conclude that the frequent cooperation observed in one-shot social dilemma games is not an artefact of the low stakes typically used in laboratory experiments. Strategic decisions on Friend or Foe change markedly if players can observe previous episodes. We show that these contestants play “friend” if they have reason to expect their opponent to play “friend,” and they play “foe” otherwise. The observed decisions are consistent with recent fairness theories that characterize individuals as conditional cooperators. Using information about past play, some groups (e.g., pairs of women) manage to stabilize cooperation in this high-stakes environment. For most others, improved coordination implies a drastic decline in monetary winnings. Prior to playing the social dilemma game, contestants “produce” their endowment by answering trivia questions. We find some evidence for reciprocal behavior: Players who produce fewer correct answers for their team are more likely to cooperate in the social dilemma game. See the paper.