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July 02, 2007

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Kevin

The consumer might be better off; they might not be.

Why should paternalistic industries be the ones to decide what the consumer wants?

Many, many consumers want the "pay TV" which you lament. It exists without advertising in the form of HBO.

Many, many consumers could very well want to pay a dollar extra per DVD to not have to watch the advertising there. Why not let them choose?

Bruce Boyden

Kevin, why should paternalistic grocery stores be the ones to decide what fruits the consumer wants? Perhaps you're a big fan of kumquats. Perhaps dozens of people in your neighborhood silently stew at the absence of kumquats. What gives the grocery store the right to stifle you and your compatriots' kumquat consumption by refusing to offer kumquats?

Behavioral Dork

Professor Picker, you write: "But now we see why law will be called on in these situations."

But should it be? I can understand if there is some kind of violated contractual obligation (but I think most EULAs are of dubious validity, a topic for another day), but why and when exactly should law be called on to protect an existing business model when it is threatened by technology?

Doug Lay

>> Previews on DVDs are just another form of advertising, and again consumers might be better off—lower prices for DVDs—in a world in which fast-forwarding is limited.

This proposition seems an almost comical logical stretch to me. Can you point out any research that indicates (a) whether restrictions on device functionality in the DVD market or similar markets lead to lower prices; or (b) whether consumers have clearly indicated a preference for low pricing over increased device functionality?

>> But now we see why law will be called on in these situations.

Interesting that you drop to a very passive voice here, not even stating WHO will be calling on the law. I presume you're talking about the content industries, perhaps in collaboration with a group of co-operative device manufacturers who wish to enter into legally blessed cartel-like arrangements. Am I misreading you?

Randy Picker

This is a pretty basic collective action problem (a group prisoner's dilemma if you will). The dominant strategy is to not watch ads. One of the standard justifications for why laws can be in everyone's interest is that the law solves a collective action problem. If you are interested in the theory behind that, consult Baird, Gertner & Picker, Game Theory and the Law (available at Amazon).

Doug Lay

Framing the issue as a group prisoner's dilemma abstracts away too many important questions, I think. Are consumers the only ones whose interests should be considered? What about device makers, who in this day and age could be anyone with a modicum of technical savvy? How much do consumers value not watching ads vs lower prices on DVDs? How do you measure this? Is there even a correlation between lower prices for content and legal restrictions on device functionality? Do we just take the word of the would-be cartel members that such a correlation exists?

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