- Digital technology makes copying cheap and easy, i.e., marginal cost is near zero. Economic theory says for social efficiency, price should be equal to marginal cost.
- Cost of discovering or producing information (research and development, artistic composition) is very high.
- These are fixed costs. For information also called first copy costs.
- This configuration (high fixed cost, low marginal cost) is often called natural monopoly.
- Here is where we see the logic for "intellectual property protection."