Copyright and Competition: Estimating Supply and Demand with Unstructured Data

Sukjin Han and Kyungho Lee

Papers from arXiv.org

Abstract: We study the competitive and welfare effects of copyright in creative industries in the face of cost-reducing technologies such as generative artificial intelligence. Creative products often feature unstructured attributes (e.g., images and text) that are complex and high-dimensional. To address this challenge, we study a stylized design product -- fonts -- using data from the world's largest font marketplace. We construct neural network embeddings to quantify unstructured attributes and measure visual similarity in a manner consistent with human perception. Spatial regression and event-study analyses demonstrate that competition is local in the visual characteristics space. Building on this evidence, we develop a structural model of supply and demand that incorporates embeddings and captures product positioning under copyright-based similarity constraints. Our estimates reveal consumers' heterogeneous design preferences and producers' cost-effective mimicry advantages. Counterfactual analyses show that copyright protection can raise consumer welfare by encouraging product relocation, and that the optimal policy depends on the interaction between copyright and cost-reducing technologies.

Date: 2025-01, Revised 2025-09
New Economics Papers: this item is included in nep-big, nep-com, nep-ind, nep-ipr and nep-reg
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