Rationale of Collective Management Organizations: An Economic Perspective

In the market for information goods, externalities occur when the production or consumption of literary and artistic works is not directly reflected in the market. Economic theories regarding the creation of market externalities, the causes for market failures, and the correction of market inefficiencies provide evidence in support of retaining the copyright system as the means of correcting these market failures and inefficiencies and to encourage authorship. This approach can also be adopted to analyze the system of collective management. This article aims at analyzing the rationale of collective management system through an economic approach. The author maintains that collecting societies are effective in dealing with the complicated process of rights management, license granting and remuneration distribution.