Virtual Markets for Virtual Goods: The Mirror Image of Digital Copyright?


The Internet and Copyright Law are particularly ill-suited to each other. One is designed to give as much information as possible to everyone who wants it; the other allows authors, artists and publishers to earn money by restricting the distribution of works made out of information. The beneficiaries of copyright law are lobbying for the re-design of computers and the Internet to instate "content control" and "digital rights management" (DRM). These technologies are intended to make copyright workable again by re-imposing limits on access to information goods, but they carry high direct and indirect social costs.

One alternative, which has generally received much less attention and legislative support than DRM, is to allow free distribution of works for non-commercial use, while restructuring digital copyright law so as to remunerate authors in ways which avoid those exclusive rights models which are incompatible with the Internet. This paper introduces the concept of a "virtual market" - a decentralized, software-mediated, publicly-funded mechanism which rewards digital authorship and artistry, without restricting flows of information. The virtual market is a sort of "mirror image" of a real marketplace, assigning market-like valuations to works, without an actual process of exchange. The normative economic implications of these systems are considered in detail, along with some of the technological requirements and other practical aspects of their implementation.

This article concludes that virtual markets avoid the very high artificial scarcity ("deadweight loss") and infrastructure costs associated with DRM, and should be seriously considered as a public policy alternative to strengthening copyright law. Furthermore, while there is already a robust case for such alternative compensation systems for musical works, the nature of text and of DRM technology mean that, in time, the need for alternatives to exclusive rights will be even greater for written works.


Computer Law | Entertainment, Arts, and Sports Law | Intellectual Property Law | Law and Economics

Date of this Version

September 2004