X-Orig-From: From: Robert Hettinga X-E$Pam-Source: owner-austrianecon@agoric.com Date: Tue, 3 Jun 1997 09:55:35 -0400 To: espam@intertrader.com, e$pam From: Robert Hettinga Subject: Recursive Auctions vs. Monopolistic Intellectual Property "Rights" --------------------------------------------------------------------- This mail is brought to you by the e$pam mailing list --------------------------------------------------------------------- Mime-Version: 1.0 Date: Tue, 3 Jun 1997 07:39:51 -0400 To: AustrianECON@agoric.com From: Robert Hettinga Subject: Recursive Auctions vs. Monopolistic Intellectual Property "Rights" Sender: owner-austrianecon@agoric.com Precedence: bulk Reply-To: AustrianECON@agoric.com At 4:33 pm -0400 on 6/2/97, John Cobin wrote: > I have to second your insight. I thought about this several years ago > while speaking with Richard Wagner. It seems to me that there might > indeed be market-based alternatives to intellectual property rights. > Thus, it may also be that Microsoft has benefited from long term > monopoly profits granted by state intervention. On the net, that alternative is called a recursive auction market. Think of it as institutionalized piracy. I have something for sale that I just created, some kind of "intellectual property". I auction it to the highest bidder. Then I auction it again (bits, remember?) to the next highest bidder, and so forth. The recursive part comes from the fact that anyone I auction something to can turn right around and auction it off again. This is done in industrial goods all the time, except the pricing cycle between manufacturer to wholesaler and wholesaler to retailer and retailer to customer is *much* slower. :-). Also, in meatspace, prices go *up* at every "re-auction" because you're dealing with unique material objects which must be stored, transported etc. On the net, of course, anything digitable is infinitely replicable, so, like all information, its value declines with time and ubiquity. In such an environment, sellers with something new always make more money than sellers like Microsoft, who only have old stuff to sell. ;-). Also, people with hard-to-find digitable skills (like teleoperated surgeons, say) make money. You could eventually even do this kind of thing with packet switching, with packets being "traded" across a network to their destination in a series of "picocash" settled auction transactions. There was an excellent discussion of recursive auctions by Jason Cronk at the "rump session" of the Financial Cryptography 1997 (FC97) conference, held this February in Anguilla, and, a published version of the same idea, this time applied to the *purchase* of information and services on the net, by Ian Grigg of Systemics, Ltd., will be included in the FC97 proceedings, which will be put out by Springer-Verlag's "Hot Topics in Computer Science" series (I think that's the series name, anyway) sometime this summer. Cheers, Bob Hettinga ----------------- Robert Hettinga (rah@shipwright.com), Philodox e$, 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire' The e$ Home Page: http://www.shipwright.com/ --------------------------------------------------------------------- Where people, networks and money come together: Consult Hyperion http://www.hyperion.co.uk info@hyperion.co.uk --------------------------------------------------------------------- Like e$? Help pay for it! See Or, for e$/e$pam sponsorship, --------------------------------------------------------------------- ********** X-Orig-From: From: John Cobin X-E$Pam-Source: owner-austrianecon@agoric.com Date: Wed, 4 Jun 1997 23:58:16 -0400 To: espam@intertrader.com, e$pam From: Robert Hettinga Subject: Re: Recursive Auctions vs. Monopolistic Intellectual Property "Rights" --------------------------------------------------------------------- This mail is brought to you by the e$pam mailing list --------------------------------------------------------------------- From: John Cobin Organization: Universidad Finis Terrae MIME-Version: 1.0 To: AustrianECON@agoric.com CC: ECONLAW@gmu.edu Subject: Re: Recursive Auctions vs. Monopolistic Intellectual Property "Rights" Sender: owner-austrianecon@agoric.com Precedence: bulk Reply-To: AustrianECON@agoric.com Further to posts by Tracy and Robert Hettinga on IPRs, it seems conceivable that a person (entrepreneur, promoter, inventer, etc.) could create a product that he thinks has value to consumers, whether a book or digital item, and then find a buyer without a guaratee of intellectual property rights. He would have to get enough cash up front before releasing the product. The buyer would be responsible for controlling positive externalities from escaping his clutches. I the person went around and offerred MS Word 8.0 for sale, demonstrating its efficiency and effectiveness, do you suppose some firm, or a group of firms, would be willig to pay 20 million for it? Maybe or maybe not. But it is conceivable that they might in order to enhance their competitiveness and perhaps to sell the software to others. The same scenario might also occur if a would-be inventor were approached to make MS Word and given 1 million for start up and 19 million on completion, with penalties prescibed in their contract. In either case, the producer has an incentive to create and not worry about his intellectual property rights. A person (such as the buyer) better suited to handling the risks, control, and marketing will handle the problems of externalities. It is simply the division of labor. So I don't really see that IPRs have a public interest purpose, although they might indeed serve private interests. -- John Cobin Profesor de Economia y Politica Publica Universidad Finis Terrae Av. Pedro de Valdivia 1509 Providencia, Santiago, Chile fono +56-2-274-8084 fax +56-2-209-4135 jcobin@paki.ufinis.cl --------------------------------------------------------------------- Where people, networks and money come together: Consult Hyperion http://www.hyperion.co.uk info@hyperion.co.uk --------------------------------------------------------------------- Like e$? Help pay for it! See Or, for e$/e$pam sponsorship, --------------------------------------------------------------------- ********** Date: Mon, 9 Jun 1997 16:04:52 -0400 From: "R. Jason Cronk" To: Multiple recipients of Subject: Re: auctions I cc'd Fred Hapgood's question to the e$ list because I thought my explanation might help others. >There's something I don't understand about this model, at least in >the context of intellectual property. What's to prevent the >first person in the chain from auctioning off N copies of text T, >where N = the entire market for T? Ok, I'm not sure which you mean by first person in the chain, so I'll address both potential meanings. If by first person you mean the originator (i.e. for all practical purposes they created the IP) what prevents them is two fold. First they don't want to provide all the copies because that would decrease their reputational capital. What wholesaler is going to buy from a company that will beat you to the punch with your customers? "Burn me once shame on you, burn me twice shame on me." The second reason is that most purchasers are going to add value to the property either by manipulating it or just adding brand value to the text. If Disney decides to pick up and distribute a film the market grows. The original producer could NOT have served the "entire" market (whatever that really means). Now if by first person in the chain, you mean the first purchasers. Well they have every right to sell off as many copies as possible! The problem is that others may have purchased the same products from the original producer thus I've got to add some unique value in order to sell it. Hope this helps, R. Jason Cronk rjasonc@pobox.com ---------- The e$ lists are brought to you by: Intertrader Ltd: "Digital Money Online" Where people, networks and money come together: Consult Hyperion http://www.hyperion.co.uk info@hyperion.co.uk Like e$? Help pay for it! For e$/e$pam sponsorship, mail Bob: Thanks to the e$ e$lves: Of Counsel: Vinnie Moscaritolo (Majordomo)^2: Rachel Willmer Commermeister: Anthony Templer Interturge: Rodney Thayer