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78 U. Chi. L. Rev. 31 (2011)
The Creativity Effect

handle is hein.journals/uclr78 and id is 33 raw text is: The Creativity Effect Christopher Buccafuscot & Christopher Jon Sprigmantt This Article reports the first experiment to demonstrate the existence of a valua- tion anomaly associated with the creation of new works. To date, a wealth of social science research has shown that the least amount of money that owners of goods are willing to accept to part with their possessions is often far greater than the amount that purchasers would be willing to pay to obtain them. This phenomenon, known as the endowment effect, may create substantial inefficiencies in many markets. Our experi- ment demonstrates the existence of a related creativity effect. We show that creators of works value their creations substantially more than do both potential purchasers of their works and mere owners of the works. The creators in our study valued their works (in this case, paintings) more than four times higher than potential buyers did and al- most twice as high as did owners of the works. Further, we provide evidence that these differences are the result of creators' irrational optimism about the quality of their works. We conclude by discussing the implications of these findings for intellectual property (IP) theory in general and IP licensing in particular. Our findings challenge the classical economic approach to IP rights, and they suggest that IP markets may be less efficient than previously recognized. INTRODUCTION In this Article, we report on the second installment in a planned series of experiments designed to determine whether transactions in intellectual property (IP) are subject to the valuation anomaly com- monly referred to as the endowment effect-the empirical finding that owners of goods tend to value them substantially more than do purchasers. In previous work, we conducted experiments that demon- strated a substantial valuation asymmetry between authors of poems t Assistant Professor, Chicago-Kent College of Law. tt Professor, University of Virginia School of Law. This research has been supported by grants from the John M. Olin Foundation and the Uni- versity of Virginia Law School Foundation. The authors wish to thank Diego Leclery, Nevin Tomlinson, and Michelle Grabner of the School of the Art Institute of Chicago for helping organize the study and Meg Scalia, Lindsay Bartlett, Doug Boyle, and Daniel Crone for their superb research assistance. The authors are grateful for helpful comments received from Margo Bagley, Tom Chen, John Duffy, Dave Fagundes, Dan Gilbert, Wendy Gordon, Paul Heald, Laura Heymann, Andy Johnson-Laird, Kay Kitagawa, Ed Kitch, Oskar Liivak, Orly Lobel, Lydia Loren, Jonathan Masur, Greg Mitchell, Jeff Rachlinski, Matt Sag, Rebecca Tushnet, Alfred Yen, and participants at the Licensing of Intellectual Property Symposium at The Uni- versity of Chicago Law School, the Intellectual Property Scholars Conference at the UC Berke- ley School of Law, and workshops at the UCLA School of Law, the Lewis & Clark Law School, and the University of Michigan Law School. 31

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