DeCSS, crypto, law, and economics

[William Allen Simpson]

Eric Rescorla wrote:
> 
> William Allen Simpson <wsimpson at greendragon.com> writes:
> > Therefore, your graphs say to me: market segmentation is indicative of
> Of course. But the point that you seem to be missing is that there are
> situations where a monopoly can Pareto-dominate non-monopoly situations.
> 
The points I was making here are (1) the terms used were wrong and (2) 
there were no net benefits (wealth) to "society" from the monopoly.


> > The problem with this example, as is often the case with economists, is
> > it assumes perfect knowledge and rational behaviour.
> Of course. Because it's far harder to explain the principle without
> perfect information. That doesn't make it wrong, however.
> 
It is wrong, since it doesn't have any correspondence to the case at hand 
(DVDs, cryptography).  In fact, it is directly contrary: (1) the producers 
are not omniscient, and (2) the consumers have knowledge about pricing, 
and (3) neither the producers nor the consumers act rationally.

We can speculate forever about universes where we travel faster than the 
speed of light, but really, I don't see why we should bother with using 
such universes to model our current discussion. 


> You're implicitly assuming some method of price discrimination (in
> this case auctions). 

I'm explicitly stating that the consumers have concurrent knowledge 
about pricing.  The consumers may decide that their values are different.  
(That may not be rational.) 


> Without the ability to get one consumer to pay
> more than another, we're back to the situation that we had before,
> namely that it's unprofitable to produce the commodity. Most consumer
> goods are not sold at auction and thus more subtle forms of price
> discrimination are required.
> 
What you mean is FORCE the consumers to pay more than one another, even 
when everyone knows it a priori to be irrational. 

The question raised was whether the commodity would be produced.  The 
producer knows that in the PAST there was sufficient income from these 
consumers for the goods to be profitable. 

The producer is not pre-cognitive.  In the case at hand, producers know 
that some movies/theatricals simply never make a profit, no matter how 
wonderful.  That's risk.


> Incidentally, it's not clear that an auction will produce the effect
> you suggest. It's not necessarily your best strategy to bid up to
> your true value on the first of a series of identical items.
> 
Certainly.  For example, each consumer could decide not to bid unless 
the commodity is a "bargain" -- a behaviour frequently seen in real life 
at flea markets or garage sales.  In that case, the producer will not 
make his nut.  So?  Absent FORCE, there's never a guarantee of profit. 

-- 
William Allen Simpson
    Key fingerprint =  17 40 5E 67 15 6F 31 26  DD 0D B9 9B 6A 15 2C 32

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