Public Economics Workshop: Pengfei Zhang

Pengfei Zhang, Cornell University

The Human Side of Cyber Property Rights: Theory and Evidence from Github

Abstract:  Open access and peer production are defining features of cyberspace that challenge the conventional wisdom on property rights. This paper investigates whether the law of digital copyright undermines the incentive for open access and its associated contributions. We consider a game-theoretic model of competing creations in which a freelance creator decides whether to choose open access versus a settlement offer based upon a threat of injunction by the copyright holder, and competition between open access and its for-profit alternative allows a continuum of users to choose between voluntary contributions or royalty payment. When individuals are heterogeneous in other-regarding preference, the model exhibits two distinct equilibria: a rent-seeking equilibrium where the copyright holder blocks open access and purely reaps profits from the credible threat of litigation, and a voluntary contribution equilibrium where peer production outcompetes potential monopoly production and open access drives out any commercial interests. Copyright law can dramatically change the set of equilibria. Enforcing the exclusive right to distribute copies without compromising the exclusive right for derivative works may erode the voluntary contribution equilibrium completely. The key predictions of the model are then tested and supported by data from Github. A takedown notice has a persistent negative effect on subsequent sharing, and repositories shared by foreign users attract fewer contributions as their home countries improve upon software piracy prevention. Our findings caution against a secure property rights system in cyberspace.