Buying, sharing and renting information goods

Information goods such as books, journals, computer software, music and vid eos can be copied, shared, resold, or rented. When such opportunities for s haring are present, the content producer will generally sell a smaller amou nt at a higher price which may increase or decrease profits. I identify thr ee circumstances where profits increase: (1) when the transactions cost of sharing is less than the marginal cost of production; (2) when content is v iewed only a few times and transactions costs of sharing are low; and (3) w hen a sharing market provides a way to segment high-value and low-value use rs.