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Digital Disintermediation and Efficiency in the Market for Ideas

Author

Listed:
  • Christian Peukert
  • Imke Reimers
Abstract
Digital technology has allowed inventors to circumvent traditional intermediaries and directly reach consumers, which may affect licensing outcomes and efficiency in the market for ideas. We study these impacts theoretically and empirically in the book publishing industry, where the number of new books available to consumers has almost doubled after the advent of digital self- publishing platforms. Using data on over 90,000 license deals between authors and publishers from 2002 to 2015, we identify disintermediation-related changes in this market from quasi-experimental variation across product types over time. Consistent with digital self-publishing improving an author’s bargaining position, we find that authors get substantially more favorable license deals. We further show that ex-ante license fees reflect ex-post demand more accurately. This is consistent with additional entry generating more information about a product type’s realized appeal. In markets in which product appeal is difficult to predict, such improvements in the information environment can have large impacts on efficiency and welfare.

Suggested Citation

  • Christian Peukert & Imke Reimers, 2018. "Digital Disintermediation and Efficiency in the Market for Ideas," CESifo Working Paper Series 6880, CESifo.
    • Handle: RePEc:ces:ceswps:_6880
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6880.pdf
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    References listed on IDEAS

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    6. Luis Aguiar & Joel Waldfogel, 2018. "Quality Predictability and the Welfare Benefits from New Products: Evidence from the Digitization of Recorded Music," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 492-524.
    7. Ajay Agrawal & Christian Catalini & Avi Goldfarb, 2015. "Crowdfunding: Geography, Social Networks, and the Timing of Investment Decisions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(2), pages 253-274, June.
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    10. Waldfogel, Joel & Reimers, Imke, 2015. "Storming the gatekeepers: Digital disintermediation in the market for books," Information Economics and Policy, Elsevier, vol. 31(C), pages 47-58.
    11. Hong Luo, 2014. "When to Sell Your Idea: Theory and Evidence from the Movie Industry," Management Science, INFORMS, vol. 60(12), pages 3067-3086, December.
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    Citations

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    Cited by:

    1. Benjamin Reed Shiller, 2020. "Approximating Purchase Propensities And Reservation Prices From Broad Consumer Tracking," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(2), pages 847-870, May.
    2. Qiyuan Wang, 2024. "For-Sale-by-Owner Platforms and Intermediation Pricing: Evidence from a Natural Experiment," Marketing Science, INFORMS, vol. 43(2), pages 346-359, March.
    3. Christian Peukert, 2019. "The next wave of digital technological change and the cultural industries," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 43(2), pages 189-210, June.
    4. Grace Gu & Feng Zhu, 2021. "Trust and Disintermediation: Evidence from an Online Freelance Marketplace," Management Science, INFORMS, vol. 67(2), pages 794-807, February.
    5. Ladd, Ted, 2022. "The Achilles’ heel of the platform business model: Disintermediation," Business Horizons, Elsevier, vol. 65(3), pages 277-289.
    6. Grace Gu & Feng Zhu, 2018. "Trust and Disintermediation: Evidence from an Online Freelance Marketplace," Harvard Business School Working Papers 18-103, Harvard Business School.

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    More about this item

    Keywords

    disintermediation; innovation; book publishing; natural experiment;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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