Tyler Cowen, an economist at George Mason University, presents an interesting case that pits the market against legal and social forces. The case involves payola—the payment of money to disk jockeys for playing a songwriter's songs. He reports that Chuck Berry was having a hard time getting his music played because of racism. To counter this, he offered a well-known disk jockey, Alan Freed, partial songwriting credits, along with partial royalties, on any Chuck Berry song of his choice. He chose MaybeU lene, which he played and promoted. It went on to be a hit, Chuck Berry went on to be a star, and Freed's estate continues to receive royalties.
a. Should such payments be allowed? Why?
b. How did Freed's incentives from the royalty payment differ from Freed's incentives if Chuck Berry had just offered him a flat payment?
c. Name two other examples of similar activities—one that is legal and one that is not.