ABSTRACT
The marginal cost and open-access controversies have had substantial effects on the debate about the pricing of digital content. Unfortunately, all existing studies of pricing of digital content have not explored the full ramifications of marginal costs and open access. Contrary to some open-access theories in the literature, copyright law is necessary-for incentives, for trade (transfer, pledging, sale, documentation) in intellectual property (IP) rights, and to preserve social order (to reduce crime, breaches of contracts, and torts). This chapter introduces new elements of marginal cost analysis in the pricing of digital content, illustrates how the present mispricing of digital content contributes to illegal online file sharing (IOF), and illustrates how the various elements of marginal cost analysis can be used to allocate resources for enforcement of IP rights.
