The Knockoff Economy

How imitation sparks innovation

What's a Name Worth? We Ran a Photo Contest to Find Out...

We describe the contest/experiment, and announce the winning photos!

In my last post, I wrote about laboratory research, undertaken with my friend and co-author Chris Buccafusco, that looks at how artists – specifically, poets and painters – value their creative works. Our research suggests that creators are subject to a psychological quirk, a sort of optimism bias, which causes them to value their works, on average, substantially above what a willing buyer would be willing to pay. We called this finding the creativity effect.

The existence of a creativity effect has significant consequences. Conventional legal thinking about innovation and creativity relies on the concept of a rational innovator. Indeed, an ideal version of the rational innovator is the basis for our patent and copyright laws, which are meant to spur creative effort and bring us more new inventions and artistic works. Patent and copyright law work by giving property rights to creators. But property rights are not valuable in the abstract. They are useful only if the underlying creative work—the novel, the film, the computer software, the new drug—is valuable. If a creator's work is worth money, then having the exclusive right to offer it for sale or license—which is what copyright and patent law give to authors and inventors—is a very nice thing indeed.

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Whether this system makes sense depends on the validity of one crucial underlying assumption. Do creators act rationally? Our law assumes that innovators calculate, either explicitly or implicitly, the cost of creation versus the size of the return they will likely enjoy. A writer might anticipate a certain advance from her publisher; a musician might estimate the sales of a new song. This expected return shapes how much effort they pour into creation and what kinds of creation they pursue.

Our research finding a creativity effect – that is, the tendency of creators to overvalue their works – throws a wrench into this picture of the rational creator. The creators in our experiments tended to overvalue their works in a laboratory setting, but they are not alone -- we see behavior like this all the time out in the real world. Most people think they’re better-than-average drivers, not to mention smarter than average. And our laboratory findings suggest that creators may be even more prone to this sort of illusion. Optimism bias, in short, leads many innovators to think they will gain a greater return from their intellectual creations than they actually do.

Why is this important to understanding creativity? For two reasons. First, the creativity effect likely acts as a subsidy for innovation. Creators who have an unduly strong belief in their ultimate prospects for success should be willing to invest more in their creativity. This increased willingness to invest is likely, in turn, to lead to increased creative output as compared with a world in which creators rationally calculated the odds. And this may be true even in our current situation where an awful lot of people take creative works for free — that is, pirate them. Creators' irrational optimism may lead them to create even in the face of expected losses from piracy.

The second implication, however, is far less happy. Because creators tend to value their works at a level much higher than potential buyers do, transactions in creative works become more difficult. Buyers’ and sellers’ initial bids start further apart, on average, than we might otherwise think. The parties are forced to invest more in negotiation to reach a deal. And they fail to reach deals more often than we’d predict in a world without the creativity effect. That means that markets in creative works – art, literature, scientific and technical innovations – may be less efficient than we thought previously.

Which brings us to our most recent study. Prof. Buccafusco and I wondered whether the creativity effect could be reduced if, instead of just competing for a cash prize, photographers were also give the opportunity to have their work published with their name on it. If creators care about getting their name out there, we thought, they might reduce the amount of money they demanded in exchange for a shot at credited publication. And that might help make transactions in creative goods easier and more efficient.

We designed an experiment to investigate this possibility. First, we recruited photographers to participate in a photo contest. Our contestants uploaded a digital picture that they had taken themselves. Each contestant’s photo would be judged against 99 other photographs by a photography expert, and the winning photograph would receive a prize of $1000.

At this point, the participants were randomly assigned to one of three conditions:

1) Contest Condition: In this condition, participants were told that their photo would be viewed by another participant before any judging would take place. The buyer would make a cash offer which, if accepted by the photographer, would result in the transfer of the opportunity to win the $1000 prize from the photographer to the buyer. The offer was not for the photograph itself, but only for the right to be paid the prize if the photograph was judged the winner.

Once informed of the rules, the photographer was asked to specify the lowest amount she would accept to sell her photograph’s contest rights.

2) Publication Condition: The second condition was identical to the first, except for the prize on offer. In the Publication condition, the photographers were offered the opportunity to have their photo published, uncredited, on a major website. But the possibility of publication would arise only (a) if the photo’s chance to win had been sold to the buyer and (b) the photo won the contest.

3) Attribution Condition: The condition was identical to the Publication condition, but if the conditions specified above were met, the photograph would be published along with the photographer’s name.

We structured the conditions this way in order to determine whether our photographer subjects valued publication and attribution, and whether their attraction to these prospects would reduce their price demand relative to a situation in which the only prize was cash.

Our results, which you can see in full in a paper you can download here, showed that photographers attached significant value to attribution – that is, they were willing to accept significantly less money in exchange for the prospect of having their photograph published with their name on it. They wanted about $243.00, on average, to transfer their chance of winning the $1000 in cash, but were willing to take $165.00 – substantially less – when the prospect of credited publication was on offer.

Interestingly, the prospect of mere publication, without credit, was not so attractive – there was no significant difference between the first and second condition in our experiment.

So, the upshot – the prospect of publication with attribution helps to mitigate the creativity effect. But it does not eliminate it! Our photographers continued to value their work at a level significantly above what the average buyer would likely be willing to pay for it. So the prospect of credited publication does help markets for creative goods work more efficiently. But it does not eliminate the inefficiencies that the creativity effect imposes. Oh well.

Alright – that’s our description of the experiment. But now let’s get to the fun part – announcing the winning photo and the runner up. We were fortunate to have as the judge for our contest Laura Parsons, an award-winning Charlottesville, Va.-based writer, who spent eight years as art editor for Charlottesville’s arts and culture weekly The Hook and worked as a contributing editor to Virginia Living magazine. She has an extensive background in book and magazine publishing and is currently developing an online art and design magazine. In addition, she is an artist herself, whose mixed-media works combine digital imagery and sculpture. Laura took a hard look at the many wonderful photos entered in our contest, and here are the two best . . .

Grand-Prize ($1000) Winner: “The Last Drop” by My Phuong Nguyen

Laura’s comment: “More than just a color-lush portrait of a hummingbird, My Phuong Nguyen’s “The Last Drop” seduces the viewer with subtle details. The tension created by the stillness and clarity of the suspended drop on the bird’s glossy beak on the left in contrast with the blurred wing in motion on the right is exquisite. The green-stemmed indigo buds in the foreground combine with the haze of saturated color in the background to frame the subject beautifully, calling attention to the turquoise, yellow, and orange details of the bird’s feather patterns. Also, the extended shapes of the wing feathers echo the flower petals, with one petal on the bottom right paralleling the wing’s angle and highlight.”

1st Runner Up ($300): “Grand Prismatic Crosser” by Steve Fisher.

Laura’s comment: “The silhouetted bison provides not only a focal point and but also a place for the eye to rest amid the dazzling array of lines, textures, and colors in the sunlit landscape.  Stunning!”

Congratulations to My Phuong and Steve.  And thanks to all our photographers for your great work, and for helping us to learn a bit more about the psychology of creativity!

Christopher Sprigman, J.D., is the Class of 1963 Research Professor at the University of Virginia School of Law. He is the co-author of The Knockoff Economy.

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