Our findings suggest that private transactions in creative goods may face significant transaction costs arising from cognitive biases. These biases in turn drive the price that creators and owners of IP are likely to demand considerably higher than buyers will, on average, be willing to pay. This discovery does not mean, of course, that transactions in IP will not take place — we see such transactions happening every day. Our research suggests, however, both that IP transactions may occur at a frequency that is significantly suboptimal and that the baleful effect of cognitive and affective biases is likely to be more serious for transactions in works of relatively low commercial value or for which no well-established custom or pattern helps to inform valuation. These results have considerable implications for the structuring of IP rights, IP formalities, IP licensing, and fair use.

Most broadly, we believe that our results should inform the ongoing debate over whether IP law is best structured around property rules or liability rules. Additionally, we argue that our results point toward the advisability of copyright re-formalization, which is best achieved via reformulation of copyright as remedies provisions to limit owners of works that are unregistered (and therefore presumptively of low commercial value) to the effective equivalent of a liability rule. Finally, our findings should inform copyright'(TM)s fair use doctrine. Many courts considering the fair use defense already base their analysis, in part, on the presence of significant transaction costs that lower the likelihood that the parties would have negotiated a license and therefore make fair use more appropriate. In light of our findings, courts should consider whether a license for the use at issue in a particular case would likely be subject to significant endowment effects. If so, it is less likely that the parties would have struck a deal as an alternative to the defendant'(TM)s unauthorized use, therefore making a finding of fair use more appropriate.