1. Gone in 60 Seconds: The Impact of the Megaupload Shutdown on Movie Sales
by Brett Danaher (Wellesley College – Department of Economics) and Michael Smith (Carnegie Mellon University – H. John Heinz III School of Public Policy and Management)

Brett Danaher, Michael Smith
With a large body of the academic literature finding that illegal filesharing poses a threat to media sales, a natural follow-on question is: how should media companies respond to this threat? In our prior research we found that making it easier to consume through legitimate digital distribution channels can reduce the demand for pirated content. In this research we analyze whether the reverse is also true: Does making it harder for consumers to access digital piracy increase demand through legitimate channels. This question has significant managerial and policy implications as businesses and governments struggle with how to respond to the financial threat piracy poses to the creative industries.

We analyze this question in the setting of Megaupload.com, a site that was one of the most popular piracy-enabling sites online, became the target of a U.S. indictment because of its piracy activities, and ultimately was shutdown over the course of several days in Janary 2012. We use this event to ask whether government interventions aimed at making piracy less attractive by raising the implicit cost of piracy can also be effective at migrating consumers from illegal to legal channels. Our research finds that the answer to this question is “yes” — in our data the shutdown of Megaupload seems to have caused a 6-10% increase in worldwide digital movie sales for the two major studios in our dataset.

Moving forward, while our study establishes that shutting down a major piracy site can cause some consumers to migrate from illegal to legal channels, in the future we are interesting in studying whether related interventions, such as the voluntary Copyright Alert System adopted by Internet Service Providers in the U.S., are similarly effective and what attributes of these anti-piracy programs (e.g., education, threats of prosecution, reducing the convenience of piracy, voluntary or government-mandated) are most important in driving any observed changes.

2. A Brief Introduction to the Basics of Game Theory
by Matthew Jackson (Stanford University – Department of Economics)

3. The Dirty Laundry of Employee Award Programs: Evidence from the Field
by Timothy Gubler (Washington University in Saint Louis – John M. Olin Business School) and Ian Larkin (Harvard Business School – Negotiation, Organizations and Markets Unit) and Lamar Pierce (Washington University, Saint Louis – John M. Olin School of Business)

Lamar Pierce
Despite their prevalent use, corporate awards have been little researched by economists and management scholars. Our paper was motivated by the observation that awards are widely thought to be “free” or cheap methods by which to motivate employees. Because there is little cost to give them, in the worst case awards simply do not influence employee behavior, and are therefore a “wash” from the point of view of the company. In the best case they motivate employees to perform better, and represent a cheaper way to induce positive actions than, for example, performance pay. Our study, however, found that a simple award for perfect attendance had a number of unanticipated downsides and actually appears to have demotivated certain employee groups. Most strikingly, employees who had either previously exhibited good attendance behavior or high productivity reacted to the introduction of the award by working less hard, leading to a negative impact on overall plant productivity. Our results demonstrate awards for one action – in this case showing up on time – can have spillover effects to other actions, such as productivity. Overall, our research suggests that companies need to carefully think through the anticipated and unanticipated responses of employees to “free” tools such as corporate awards, and that companies should think twice about awarding behavior that an employee should exhibit anyway. Awards surely have a place as a motivational tool, but rewarding excellence may be a better strategy than rewarding behavior expected of all employees.

4. Inside the ‘Black Box’ of Sell-Side Financial Analysts
by Lawrence D. Brown (Temple University) and Andrew C. Call (University of Georgia) and Michael B. Clement (University of Texas at Austin – Department of Accounting) and Nathan Y. Sharp (Texas A&M University – Department of Accounting)

5. A Quantitative Approach to Tactical Asset Allocation
by Mebane T. Faber (Cambria Investment Management)