{"id":29809,"date":"2016-11-30T11:32:05","date_gmt":"2016-11-30T16:32:05","guid":{"rendered":"http:\/\/www.iposgoode.ca\/?p=29809"},"modified":"2016-11-30T11:32:05","modified_gmt":"2016-11-30T16:32:05","slug":"irrational-choice-theory-prof-chris-buccafuscos-search-for-the-biases-of-creativity","status":"publish","type":"post","link":"https:\/\/www.yorku.ca\/osgoode\/iposgoode\/2016\/11\/30\/irrational-choice-theory-prof-chris-buccafuscos-search-for-the-biases-of-creativity\/","title":{"rendered":"(Ir)Rational Choice Theory: Prof. Chris Buccafusco\u2019s Search for the Biases of Creativity"},"content":{"rendered":"<p>What happens when intellectual property law collides with the social sciences? They meld together for some fascinating experiments. In a lecture given at Osgoode Hall Law School as part of the IP Osgoode Speaks Series, <a href=\"http:\/\/www.cardozo.yu.edu\/directory\/christopher-j-buccafusco\" target=\"_blank\" rel=\"noopener noreferrer\">Prof. Chris Buccafusco<\/a> described three such experiments performed by him and his team.[1]\u00a0 Specifically, their research seeks to develop an understanding of the nuances that drive creative behaviour in intellectual property markets.<\/p>\n<p><!--more--><\/p>\n<p>Intellectual property law is meant to provide incentives for creators to both engage in useful innovation and make their creative works available to others. In order to do this well, there ought to be an understanding of the kinds of incentives that encourage creativity. \u201cIP law has to have a theory of why people create, how they interact with the things that they create, and how the markets for creativity and innovation are likely to work,\u201d\u00a0Prof. Buccafusco tells us.<\/p>\n<p>When dealing with this theory of IP law, most of the legal literature and scholarship derives its assumptions on the basis of Rational Choice Theory (RCT). RCT postulates that people weigh the costs and benefits of each decision, and they\u2019ll make decisions that maximize their self-interest by giving them the greatest satisfaction. Prof. Buccafusco then poses the critical question: \u201care any of these assumptions that underlie the nature of intellectual property law in fact correct?\u201d<\/p>\n<p>His following\u00a0<a href=\"https:\/\/ssrn.com\/abstract=2838317\" target=\"_blank\" rel=\"noopener noreferrer\">three experiments<\/a> seek answers to this question, and they look to do so by finding out which biases cause creators to deviate from the cold, calculated behaviour of RCT.<\/p>\n<p><strong>The Endowment Effect<\/strong><\/p>\n<p>The first bias Prof. Buccafusco\u2019s examines is the endowment effect \u2013 that is, the hypothesis that people place more value in a good when their property right to that good has been established.<\/p>\n<p>He beings by describing an <a href=\"https:\/\/www.jstor.org\/stable\/2937761?seq=1#page_scan_tab_contents\" target=\"_blank\" rel=\"noopener noreferrer\">experiment by economist Richard Thaler <\/a>in which coffee mugs were randomly distributed to half of an undergraduate law and economics class at Cornell University. The students assigned a mug each quoted the lowest price that they\u2019d be willing to accept to sell the mug, while the students not assigned a mug gave the highest price that they\u2019d be willing to pay to buy the mug. Under RCT, one would expect that these prices should be about equal. But they weren\u2019t. By simply being endowed with the mug, the sellers\u2019 prices were much higher than the buyers\u2019 prices on average. As a consequence, the number of completed sale transactions was less than what RCT would predict.<\/p>\n<p>So how might this bias play out in an intellectual property market? This is where Prof. Buccafusco\u2019s experiment comes in.\u00a0They set up a contest in which ten student painters submitted their paintings to compete for a $100 prize. These \u201cPainters\u201d were told that they would be matched with a second group of \u201cBuyers\u201d who would make the painters a cash offer to purchase the right to the Painter\u2019s prize if their painting won the contest. The Painters were asked to write down their lowest price they\u2019d sell this right for and the Buyers the highest price they\u2019d pay. If the prices met, then a transaction would occur; the Buyer\u2019s cash for the Painter\u2019s chances of winning.<\/p>\n<p>In addition to these two groups, an \u201cOwner\u201d group was each randomly assigned ownership of one of the paintings and stood to win the $100 prize if their painting won. Similar to the Painters, they were asked to write down their lowest price for which they\u2019d sell their chances of winning the prize to one of the Buyers. There being a 1 in 10 chance of winning $100, the rational prices of all three groups (ignoring the perceived quality of each painting) shouldn\u2019t deviate much from $10.<\/p>\n<p>The actual median prices were as follows:<\/p>\n<p>Buyers: $17.88<\/p>\n<p>Owners: $40.67<\/p>\n<p>Painters: $74.53<\/p>\n<p>What do these staggering differences tell us? Not only did the endowment effect create a gap in the valuations of the Owners and the Buyers, but the act of \u201ccreating\u201d caused an even bigger gap between the Painters and the Owners. \u201cInitial endowment may be really sticky\u201d explains Prof. Buccafusco. His research tells us that the intellectual property market may not be as efficient as RCT might predict: fewer transactions occurred as the result of this bias than may be ideal.<\/p>\n<p><strong>Content Attribution<\/strong><\/p>\n<p>Prof. Buccafusco tells us the second experiment\u2019s goal of determining \u201cthe extent to which people are willing to trade off real dollars for an opportunity to have their name attached to a work that they\u2019ve created.\u201d\u00a0How much do creators value receiving credit for their work?<\/p>\n<p>In this experiment, photographers are told that a graphic designer is looking for a photograph to use as the background of an image that she is submitting to a contest for a $1000 prize. They\u2019re told that she is going to see the photographer\u2019s photo plus four others and will buy the rights to use one of them. The photographer would get cash in this transaction, but no prize money from the contest that the designer is entering. However, they\u2019re also told that their photo will appear on a major website if the designer wins the contest.<\/p>\n<p>The photographers are randomly split into two groups. Group 1 is given no default attribution \u2013 analogous to the system in the United States. That is, they\u2019re told that they will <u>not<\/u> be given credit for their photograph\u2019s appearance on the website. Group 2 is given default attribution \u2013 analogous to the system in Canada. Here, they\u2019re told that they <u>will<\/u> be given credit for their photograph\u2019s appearance on the website. Both groups are first asked how much money they\u2019re willing to accept to sell the designer their rights to use their photos in this contest: the first group without credit, and the second group with credit.<\/p>\n<p>After stating this price they\u2019re each then told that they have the opportunity to switch the status of their attribution. Group 1 is asked how much money they\u2019d be willing to accept to sell their photo if the designer chose to give them credit. One would expect that this second price would be lower than the first price if content creators value having their names attached to their work. Meanwhile, Group 2 is asked how much money they\u2019d now be willing to accept to sell their photo if the designer decided to remove the photographer\u2019s credit from the website. Because, again, of the value creators place in their names, one would expect that this second price would be higher than the first price.<\/p>\n<p>In essence, Group 1 was now <em>buying<\/em> their right to attribution and Group 2 <em>selling<\/em> their right to attribution.<\/p>\n<p>By looking at the average difference between the non-credited and credited prices for each group, it can be determined if the attribution rights were valued more in the no-default or default system. The results were as follows:<\/p>\n<p>Group 1 (No-Default Attribution) Difference: $3.61<\/p>\n<p>Group 2 (Default Attribution) Difference: $14.77<\/p>\n<p>The results are significant. The data shows us that the act of being endowed with attribution caused Group 2 to value being credited for their work over four times as much as Group 1. Because of the endowment effect, people seem less willing to sell their credit than they do to buy it.<\/p>\n<p>What does this tell us in practical terms? Again, \u201cthe default creates a kind of stickiness,\u201d\u00a0says Buccafusco. Being given attribution rights by default might make the access to the works of creators especially sticky, he explains, and this makes the markets for them deeply inefficient. The American system appears to make more sense here: if we want more transactions for creative works to occur thereby increasing the number of works in use, then we may not want to\u00a0be starting creators off with the right to credited use by default. For efficiency's sake, perhaps we should\u00a0allow them to bargain for the right at a cheaper price through contracts.<\/p>\n<p><strong>Borrow or Innovate?<\/strong><\/p>\n<p>Third and finally, Prof. Buccafusco\u2019s seeks to determine how people make decisions to create in markets characterized by sequential innovation. Innovation is built on innovation. Buccafusco illustrates this: we first had Dracula the book, and then we had Dracula the movie. Then came the Twilight novels, the Twilight movies, the Twilight Fan Fiction, and 50 Shades of Grey. Innovation almost never happens in isolation.<\/p>\n<p>There are two choices for a creator in a market with existing works: borrow or innovate. To borrow is to pay for a license, and to innovate is to work around the existing IP. Both of these options have costs. Borrowing has licensing fees, and innovation has risks of uncertainty. As existing rights fill up the innovation space and there\u2019s less room to innovate, we\u2019d expect this innovation would decrease as it becomes harder to do.<\/p>\n<p>The experiment focused on this borrow\/innovate decision. In it, subjects are given Scrabble letters with which to earn points by forming words. They are given two options: they can borrow from a pre-existing solution that is first shown to them, or they can innovate and create a solution from scratch. Innovating gives them bonus points, while borrowing does not.<\/p>\n<p>The subjects are split into three groups based on the quality of the pre-existing solution shown to them without being told this quality: 60% of the best solution, 80% of the best solution, and 100% of the best solution. If the subjects were to act rationally, one would hypothesize that the subjects presented with more complete solutions would be more likely to borrow from the solutions given to them (and less likely to innovate).<\/p>\n<p>The results are unexpected:<\/p>\n<p>60% Group: 46.8% innovators<\/p>\n<p>80% Group: 40.9% innovators<\/p>\n<p>100% Group: 85.7% innovators<\/p>\n<p>We saw a drop in the innovators between 60% and 80%, but why did we see an <em>increase<\/em> in the number of innovators between 80% and 100%? Prof. Buccafusco thinks that the subjects were influenced by an \u201cinnovation heuristic.\u201d Subjects didn\u2019t look at the value of the solutions in terms of the points they were worth; they simply considered how easy it would be to come up with some new words that weren\u2019t in the pre-existing solution. Since the 100% solution had quite difficult words, the subjects had little trouble coming up with alternative words of their own without regard for the fact that their low values make them terrible Scrabble words. And they lost a lot of points because of this.<\/p>\n<p>So what does this mean for innovation? \u201cWe tend to think about innovation as always good,\u201d Prof. Buccafusco continues. The bias revealed in this experiment shows that creators may be predisposed to spend energy coming up with solutions that already exist for license. \u201cInnovation is often terrible,\u201d Buccafusco concludes. It often leads to \u201cproducing stuff that we already have, but expending substantial amounts of resources to do so.\u201d<\/p>\n<p>Prof. Buccafucso's research shows us that creators' decision-making in IP markets appears to be significantly altered by these three biases. Perhaps the resulting market \"stickiness\" is even causing the decisions of these creators and their\u00a0welfare to diverge.\u00a0If we want our intellectual property law to be\u00a0effective when it\u00a0provides incentives for creators to engage in useful innovation and make their creative works available to others, then it's clear that we need to\u00a0take into consideration biases like\u00a0these and others.<\/p>\n<p>&nbsp;<\/p>\n<p><em>Mike Noel\u00a0is an IPilogue Editor and a JD candidate at Osgoode Hall Law School.<\/em><\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p>[1] \"<em>Valuing Intellectual Property: An Experiment<\/em>\" is available at SSRN: <a href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=1568962\" target=\"_blank\" rel=\"noopener noreferrer\">https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=1568962<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>What happens when intellectual property law collides with the social sciences? They meld together for some fascinating experiments. In a lecture given at Osgoode Hall Law School as part of the IP Osgoode Speaks Series, Prof. Chris Buccafusco described three such experiments performed by him and his team.[1]\u00a0 Specifically, their research seeks to develop an [&hellip;]<\/p>\n","protected":false},"author":2140,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","footnotes":""},"categories":[3,364,280,2542],"tags":[2879,2880,2881,2882,2883,2884],"class_list":["post-29809","post","type-post","status-publish","format-standard","hentry","category-blogs","category-events","category-innovation","category-ip-osgoode-speaks-series","tag-buccafusco","tag-creative-markets","tag-experiments","tag-ip-experiments","tag-mike-noel","tag-social-sciences"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>(Ir)Rational Choice Theory: Prof. Chris Buccafusco\u2019s Search for the Biases of Creativity - IPOsgoode<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.yorku.ca\/osgoode\/iposgoode\/2016\/11\/30\/irrational-choice-theory-prof-chris-buccafuscos-search-for-the-biases-of-creativity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"(Ir)Rational Choice Theory: Prof. Chris Buccafusco\u2019s Search for the Biases of Creativity - IPOsgoode\" \/>\n<meta property=\"og:description\" content=\"What happens when intellectual property law collides with the social sciences? 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