Copyright and Product Differentiation
Christopher S. Yoo
Existing economic analyses generally frame copyright as presenting a conflict between promoting efficient levels of access to creative works on the one hand and providing sufficient incentives to support their creation on the other. The supposed irreconcilability of the access-incentives tradeoff has led most scholars to regard copyright as a necessary evil and to advocate limiting copyright protection to the lowest level still sufficient to support creation of the work. In this Article, Professor Christopher Yoo breaks with the conventional wisdom and proposes a new approach to copyright law based on the economics of product differentiation. This differentiated products approach provides an explanation for market features that appear to be internal contradictions under the traditional approach. It also surpasses prior work by providing a basis for formalizing the incentives side of the tradeoff. In so doing, it underscores the importance of an alternative means for promoting access that has largely been ignored in the current literature: facilitating entry by close substitutes for existing works and allowing the ensuing competition to increase access by lowering prices. Focusing on this alternative means for promoting access further demonstrates that the access-incentives tradeoff may not be as intractable as generally believed, since facilitatingentry can promote both considerations simultaneously. The differentiated products approach also assigns the government responsibilities that are better suited to its institutional capabilities than does the traditional approach. Equally importantly, it isolates the impact of three different dimensions of copyright protection, rather than depicting all aspects of copyrightprotectionwith a single variable in the manner of previous analyses. The more nuanced analysis made possible by the differentiated products approach suggests that economic welfare would best be promoted if copyright were strengthened along two of these dimensions and weakened along the third.