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The hidden treasure of digital piracy? It can boost bottom line for manufacturers, retailers

HBO's popular television series "Game of Thrones" returns in April, but millions of fans continue to illegally download the program, giving it the dubious distinction of being the most pirated program. Many may wonder why the TV network hasn't taken a more aggressive approach to combating illegal streaming services and downloaders. Perhaps it is because the benefits to the company outweigh the consequences. Research analysis by faculty in Indiana University's Kelley School of Business and two other schools found that a moderate level of piracy can have a positive impact on the bottom line for both the manufacturer and the retailer -- and not at the expense of consumers. "When information goods are sold to consumers via a retailer, in certain situations, a moderate level of piracy seems to have a surprisingly positive impact on the profits of the manufacturer and the retailer while, at the same time, enhancing consumer welfare," wrote Antino Kim, assistant professor of operations and decision technologies at Kelley, and his co-authors. "Such a win-win-win situation is not only good for the supply chain but is also beneficial for the overall economy." While not condoning piracy, Kim and his colleagues were surprised to find that it can actually reduce, or completely eliminate at times, the adverse effect of double marginalization, an economic concept where both manufacturers and retailers in the same supply chain add to the price of a product, passing these markups along to consumers. The professors found that, because piracy can affect the pricing power of both the manufacturer and the retailer, it injects "shadow" competition into an otherwise monopolistic market. "From the manufacturer's point of view, the retailer getting squeezed is a good thing," Kim said. "It can't mark up the product as before, and the issue of double marginalization diminishes. Vice versa, if the manufacturer gets squeezed, the retailer is better off. "What we found is, by both of them being squeezed together -- both at the upstream and the downstream levels -- they are able to get closer to the optimal retail price that a single, vertically integrated entity would charge." In the example of "Game of Thrones," HBO is the upstream "manufacturer" in the supply chain, and cable and satellite TV operators are the downstream "retailers." Kim and his co-authors -- Atanu Lahiri, associate professor of information systems at the University of Texas-Dallas, and Debabrata Dey, professor of information systems at the University of Washington -- presented their findings in the article, "The 'Invisible Hand' of Piracy: An Economic Analysis of the Information-Goods Supply Chain," published in the latest issue of MIS Quarterly. They suggest that businesses, government and consumers rethink the value of anti-piracy enforcement, which can be quite costly, and consider taking a moderate approach. Australia, for instance, due to prohibitive costs, scrapped its three-strikes scheme to track down illegal downloaders and send them warning notices. Though the Australian Parliament passed a new anti-piracy law last year, its effectiveness remains unclear until after it is reviewed in two years. As with other studies, Kim and his colleagues found that when enforcement is low and piracy is rampant, both manufacturers and retailers suffer. But they caution against becoming overzealous in prosecuting illegal downloaders or in lobbying for more enforcement. "Our results do not imply that the legal channel should, all of a sudden, start actively encouraging piracy," they said. "The implication is simply that, situated in a real-world context, our manufacturer and retailer should recognize that a certain level of piracy or its threat might actually be beneficial and should, therefore, exercise some moderation in their anti-piracy efforts. "This could manifest itself in them tolerating piracy to a certain level, perhaps by turning a blind eye to it," they add. "Such a strategy would indeed be consistent with how others have described HBO's attitude toward piracy of its products."

The Fed Should Consider Lowering Rates say the Experts from University of Rochester

On Wednesday, the Chairman of the Federal Reserve will be delivering another interest rate decision that could direct or at least prompt a punch to the arm the country’s economy. In fact, according to Narayana Kocherlakota who is currently a Professor of Economics at the University of Rochester, and who also served as the President and CEO of the Federal Reserve Bank of Minneapolis from 2009-2015 – the Fed should be dropping rates to increase stimulus t an economy in very much in need of help. In a column (see attached) published this week in Bloomberg Opinion, Kocherlakota offered this perspective, So, the Fed has been falling short — arguably well short — of both its inflation and employment mandates for a long time. How can it do better? It should take two steps. First, as I’ve argued before, the Fed shouldn’t be reducing the vast holdings of bonds that it amassed in its efforts to stimulate the economy after the last recession. Instead, it should commit to increasing its asset holdings by about 4 percent per year. That way, as the economy grows over time, its balance sheet will remain sufficiently large to help combat any recessionary risks. Second, the Fed often says that it sets monetary policy based on the incoming economic data. Such claims ring hollow when we look at the record. Recently released transcripts from its June 2013 policy-making meeting show that more than half the participants thought inflation would be below 2 percent for the next 30 months. All thought unemployment would stay above 5.5 percent. Yet it was precisely at that meeting that they agreed to begin tightening by announcing their intention to ease off on bond purchases in the near future.” So, what can we expect from Wednesday’s decision by the Fed? Will we see a drop in rates? What will a higher interest rate look like and what would that mean for America’s economy? Or … if nothing changes and the Fed holds steady, what will that mean for the economy in the short term? There are a lot of questions and that’s where the experts from the University of Rochester are available.  Dr. Narayana Kocherlakota was the President and CEO of the Federal Reserve Bank of Minneapolis from 2009-2015. As part of his responsibilities in that position, he served on the Federal Open Market Committee (FOMC), the monetary policymaking arm of the Federal Reserve System. He is currently a Lionel W. McKenzie Professor of Economics and is an expert in financial economics, interest rates and monetary policy. Narayana is available to speak with media regarding the economic effects of the shutdown – simply click on his icon to arrange an interview.

Brexit, political rancor may cause long-term damage to British economy

Sandeep Mazumder, associate professor of economics and UK native, is available to comment by phone or email on the ongoing power struggle over control of Britain’s planned exit from the European Union. “Uncertainty abounds in the United Kingdom – both in Parliament, and with regards to Brexit. At this point, there are several outcomes that could result from Theresa May's proposed deal being voted down by the UK’s Members of Parliament," Mazumder says. "As it stands, the UK could be on course for a hard Brexit in March with no deals in place with the European Union. A lack of trade deals, in particular, will likely be very damaging to the British economy." "But, a hard Brexit is not a given either. Changes in the political set-up could open doors for other outcomes as the world waits to see what will happen,” says Mazumder. For now, the uncertainty surrounding Brexit is most likely to harm markets involving British firms, he adds. Mazumder is an expert in macroeconomics, monetary policy and international finance.

U.S. economy to remain strong through most of 2019, with output averaging 3 percent

Higher than expected economic growth in 2018 should continue into next year, with U.S. output averaging 3 percent and continued strong gains in domestic job growth. Indiana will continue to outperform the nation, with output growing at a rate of 3.2 percent, according to a forecast presented today by Indiana University's Kelley School of Business. A year ago, members of Kelley's Indiana Business Outlook Tour panel predicted that U.S. gross domestic product would grow by 2.6 percent this year and about 3 percent if tax reform were enacted. Indiana was forecast to see growth of 2.8 percent. Friday's release of GDP data for the third quarter supports their view that 2018 should end up with output growth above those levels. "The tax cut has produced an acceleration in the U.S. economy during 2018 to well above the new normal status quo of 2 percent growth," said Bill Witte, associate professor emeritus of economics at IU. "We expect output growth in 2019 to average 3 percent, but with deceleration as the year proceeds. By this time next year, quarterly growth will be heading toward equilibrium growth at a little below 2.5 percent." The story in Indiana and the greater Indianapolis area is very similar. "The state economy appears poised to see its strongest growth in the first quarter of 2019, after which growth rates are expected to slow but remain strong through the end of the year," said Ryan Brewer, associate professor of finance at Indiana University-Purdue University Columbus and author of the panel's Indiana forecast. "It is most likely Indiana will continue to experience growth across the board -- in jobs, numbers of establishments, income levels, wages as well as gross state product." The Kelley School released its forecast this morning at the Indianapolis Artsgarden and will present it again at 11 a.m. today in Bloomington. The Business Outlook Tour panel also will present national, state and local economic forecasts in eight other cities across the state through Nov. 28. The national labor market has exceeded expectations for two years now. A year ago, the panel felt the U.S. economy would create jobs at a monthly rate of about 175,000 and that the unemployment rate would fall to 4 percent. Instead, monthly job creation through September has averaged nearly 200,000, and the jobless rate has fallen to 3.7 percent. These job creation trends are expected to continue into 2019, with average monthly job gains of 200,000, and the participation rate -- which measures the percentage of the U.S. population that was employed or looking for a job -- remaining flat. "The labor market will be increasingly tight," Witte said. "The unemployment rate could decline a little, but firms unable to find workers will remain an important theme." Risks to the forecast include the effects of political uncertainty, further trade disputes and economic concerns being felt in other parts of the world, including China and Europe. The panel also expressed reservations about the impact of further Federal Reserve interest rate hikes. They expect the federal funds rate to rise above 3 percent by the end of 2019. Kyle Anderson, clinical assistant professor of business economics and author of the forecast for an 11-county area that includes Indianapolis, Carmel and Anderson, said the region is at full employment, and continued job growth will ensure it stays there. Economic growth in the area will average about 2.5 percent. "Communities around Central Indiana are finding it necessary and important to invest in projects that improve quality of life and provide amenities for residents," Anderson said, referring to examples of this in downtown areas of Indianapolis and Speedway and in Carmel. "The message to community leaders is clear: Investing in infrastructure to improve quality of life is necessary to maintain a healthy local economy. "Tax incentives are not sufficient to draw in businesses and residents. Bike trails, community centers and connected neighborhoods were once seen as luxuries, but now are important economic development tools," he added. "This trend will continue, especially if the economic expansion continues nationally." Other highlights from today's forecast: ·      Consumer spending will continue to grow, although at a rate less than in 2018. ·      Business investment will be good, but held back by trade concerns. ·      Housing will resume growth with a small boost from the aftermath of hurricanes Florence and Michael. Elsewhere, including in Central Indiana, 30-year mortgage rates, nearly a full point higher than a year ago, could dampen enthusiasm for new housing and constrain prices. ·      Government spending will be strong early in the year, but growth could slow significantly toward year end.  ·      The trade balance will show increasing deficits. A detailed report on the outlook for 2018 will be published in the winter issue of the Indiana Business Review, available online in December. For more assistance, contact George Vlahakis, associate director of communications and media relations at the IU Kelley School of Business, 812-855-0846 (o) or 812-345-1500 (m), vlahakis@iu.edu.

New research examines impact of 'homesharing' services like Airbnb

Local governments across the country are passing laws to limit short-term rentals like Airbnb, HomeAway and VRBO, with Washington, D.C., poised to put some of the strictest limits yet on these homesharing services. Kashef Majid, an assistant professor of marketing at the University of Mary Washington, has examined more than 12,000 rentals in the nation's capital over nearly a decade, identifying which properties are most in demand and earn the most revenue as well as the impact of price and location on demand. Majid also found that commercial operators -- those that purchase properties solely to rent on short-term rental markets like Airbnb -- limit the supply of affordable housing, create neighborhood tensions and negatively impact the number of rentals.  "The issue of commercial operators became so contentious that the largest county in Virginia (by population) recently passed legislation to prevent their existence," Majid said. "Commercial operators are simply one example of the issues that arise within the sharing economy. Our research has also explored parallels in other markets, such as ride sharing." Majid is available to speak with media regarding these topics and this research. To contact him, simply click on his icon to arrange an interview.    

Is America’s economy about to learn a very hard lesson regarding student debt?

1.5 trillion dollars. That’s an enormous amount of money. And it’s the anchor around the next generation of Americans who have student debt. In fact, we’re now seeing people declaring bankruptcy before they’ve actually started accumulating wealth and participating in the economy. All of this spells bad news for the future. But what can be done? Is this a problem for politicians to solve? Is it up to schools to the schools charging thousands per year in tuition? Do lenders need to be regulated? Or should the onus fall on the student’s themselves who sign on the dotted line for loans they already know will be hard to pay back? There are a lot of questions out there and that’s where the experts from Cedarville University can help. Kim Jenerette is the Executive Director of Financial Aid at Cedarville University and is an expert in student debt, student load default rates and the overall affordability of education. Kim is available to speak with media regarding this growing issue. Simply click on his icon to arrange an interview. Source:

What can the Big Mac tell us about our economy?

McDonald’s is celebrating Big Mac’s 50th anniversary by giving away MacCoins, which customers can use to buy a Big Mac in 50 countries. The idea of creating this burger currency, according to the company, originated from the “Big Mac Index,” which The Economist has used since 1986 to compare real currencies across the globe. Because McDonald’s has more than 36,000 restaurants in more than 100 countries, the price of its top-selling burger, locally produced in more than 80 countries, has been used to indicate the purchasing power of a country’s economy. What does burgernomics tell us about our economy? Dr. Simon Medcalfe is a professor of economics and finance at Augusta University and is available to discuss: • How the Big Mac Index is calculated • What the latest Big Mac Index says about the U.S. dollar and the U.S. economy • Why the Big Mac has been called the nearly perfect commodity for currency comparison Medcalfe has published academic articles in the areas of sports and health economics and economic education as well as contributed to labor economics and entrepreneurial finance textbooks. Contact us to schedule an interview with Dr. Medcalfe or learn more about his expertise. Source:

The role of the economy on individualism

Past work has shown that as countries become wealthier, people often become more individualistic. In new research, Emily Bianchi, assistant professor of organization & management, takes the investigation a step further and finds that even subtle fluctuations in the economy are associated with changes in individualism. She finds that during good economic times, Americans are more likely to seek out ways to signal their uniqueness and individuality. For instance, during boom times, Americans tend to give their children more uncommon names and are more likely to prize autonomy and independence in child-rearing. They are also more likely to favor music featuring self-oriented lyrics. Conversely, during recessions, Americans tend to focus more on fitting in and tend to give their children more common names, listen to more relationally oriented music, and encourage their children to get along with others. Additionally, Bianchi discovered that recessions engender uncertainty, which, in turn, decreases individualism and encourages interdependence. The study results indicated that the “link between wealth and individualism is driven not only by differences in how people live, work, and learn but also by their sense of the predictability, orderliness, and certainty of the surrounding environment.” Source:

Supply network structure and systemic risk

Demand uncertainty can present a serious challenge for any business, especially when it comes to managerial decisions on inventory. But when an economic downturn happens, the challenge becomes systemic. According to research by Nikolay Osadchiy, assistant professor of information systems & operations management, and coauthors Vishal Gaur (Cornell U) and Sridhar Seshadri (Indian School of Business), systemic risk is more greatly felt depending on where a company sits in the supply chain. The trio discovered that while an economic downturn presented a serious hurdle for retailers, wholesalers, and manufacturers alike, manufacturers were more prone to systemic risk given their placement upstream in the supply chain. Manufacturers had “a more dispersed customer base,” which the authors noted was more closely “associated with higher systematic risk.” Manufacturers also experienced greater systemic risk due to the effect of aggregation of orders over time. They wrote, “A market shock in one period may affect sales over several periods due to lead times and time lags in managerial decision making.” Source:

The effect of multitasking on worker performance

Diwas KC, associate professor of information systems & operations management, completed an in-depth investigation of the impact of multitasking in a complex work environment by analyzing patient flow and clinical data of physicians in a large hospital ER. The study provides important findings for understanding multitasking and its “implications for a knowledge economy, where attention and focus are significant drivers of productivity and quality.” The research indicated that multitasking starts out as a positive influence on work, giving physicians the “ability to utilize idle time between tasks.” Additionally, lower levels of multitasking actually improved the quality of care, since “low levels of stress can aid cognitive function.” Once multitasking behavior became excessive, productivity declined dramatically due to a variety of factors, including work interruptions and coordination costs. A higher level of multitasking also led to a drop in detected diagnoses and an increased rate of revisits in a 24-hour period for patients initially treated in the emergency department. Physicians spent less time with patients and their overall focus suffered. Source: