The Internet’s Greatest Coase Theorem Violation: Nissan.com

I recently blogged about how well the Coase Theorem does online. It predicts that, regardless of who is assigned property rights, the interested parties will strike a bargain to put the asset in the hands of the party that values it the most. Thus, despite the fact that more or less anyone can purchase a URL for a small amount of money, in practice, these URLs almost always lead to a site that we would expect them to, because this is presumably the most efficient outcome.

There are, of course, always interesting exceptions. As such, I challenged our readers to find Web addresses that do not lead to a place you might expect. As always, with a little bit of Freakonomics memorabilia as enticement, the collective knowledge of the readers proved immense. Still, there just weren’t that many good examples to be had.

Here is the best of what you found:

Whitehouse.org leads you to a site that mocks George Bush.

ForeignAffairs.com won’t lead you to the magazine, but it will help you find a Russian bride. (There is likely more demand for the latter than the former anyway.)

Like American.com (the example I gave in my original post, when I noted that it doesn’t lead to the airline), Northwest.com is similarly not owned by Northwest Airlines.

A different sort of breakdown of the Coase Theorem is when a site you might expect to be associated with a person or product leads you nowhere. For instance, you might guess that Warren Sapp would want his web address to be Warrensapp.com, but instead it is Qbkilla.com. A Time magazine article describes how Sapp was unwilling to pay the cybersquatter $5,000 for the rights to the Web address bearing Sapp’s name. We now know how much Sapp values having that address: less than $5,000. Similarly, WWF.com won’t take you to the professional wrestling or the wildlife preservation home pages; instead, it essentially leads you nowhere.

The prize-winning violation of the Coase Theorem, however, goes to Nissan.com. Don’t expect to find cars there, only computers. An Israeli-born man named Uzi Nissan owns the site and describes his legal battle with Nissan Motors on the page. I love the fact that one of the arguments he makes against Nissan Motors is that 44 percent of the automaker is owned by Renault, a French company that is, in turn, partly owned by the French government. If it is French, it must be bad, apparently.

Congratulations to Justin, the winner of the contest, and to Ronald Coase for coming up with a theory that works so well in practice, despite a few exceptions.


JS

Well done. It is amazing the random places a person ends up when browsing the web. Particularly when google is not first employed.

Ada Kerman

I'm surprised no one mentioned milk.com.

steve borrelli

Drudge.com leads to blatant rip-off of the Drudge Report (drudgereport.com). I can't believe it's legal, but, to me, this represents a type of successful rip-off often seen in the animal world....

Lewis L

Re: "one of the arguments he makes against Nissan Motors is that 44 percent of the automaker is owned by Renault, a French company that is, in turn, partly owned by the French government. If it is French, it must be bad, apparently."

NISSAN means "JAPAN-made".

Wyatt

My wife recently (and very innocently) found out that Dick's Sporting Goods does not own the rights to dicks.com.

richard.com

sounds more like a quick thinking wife caught in the act...

gabriel

For those of us who write software in Python programming language, you can be easily embarrassed, if not reprimanded (or worse, fired) for visiting the site python.com at work (WARNING adult content). For software programming resources you must go to python.org.

coolrepublica

I don't agree with this choice for the winner. Nissan is a family name and I would expect anyone with that name to claim it. Now if i went to southwestairlines.com and got a site about chckens that would be weird. But if you type Honda or Nissan whatever you get you get. They are family names.

Zeche smith I said that I thought you should win for penisland.net. I am still open to sending you a swag with something in it. Email me at commentsemail AT gmail.com if you want to get your swag. You're still the winner in my eyes.

Zach

I don't get it. Why on earth doesn't he just sell the domain name to Nissan for a million dollars? the utility he would get from that money would far outweigh the benefits of maintaining the domain name and spending all his money on a legal battle. The man is obviously too stubborn to properly obey the laws of economics!!!

Dave

#9 I've been to expertsexchange.com many, many times & never realized how funny the name was. Brilliant list.

Mike Malone

Steven, interesting theory. I think one thing you may not be aware of is the tremendous value of certain domain names (particularly common words or phrases) apart from the obvious value to the "owner" of a the word/phrase (to protect their IP).

I agree that a domain will likely go to whoever values it the most highly -- transaction costs are generally low so if I value your domain more highly than you do, you'd sell it to me. The problem is, the person who values it the most is not always the person consumers expect (as you've discovered).

Here's an interesting read re: the value of domains from Business 2.0 a few months back: http://money.cnn.com/magazines/business2/business2_archive/2007/06/01/100050989/index.htm

Dave

Does he own Uzi.com too?

The man's a double-threat!

Noah

Look around on penisland.com a little more carefully; they are clearly aware of their name, and the site appears to be fake:
"Whether you're looking for a long and skinny pen, a thick pen, a fountain pen that squirts ink, or even a black pen, we have just the one for you."

Dave Beck

Zach,

Look at the site. Nissan aren't interested in buying, only in suing.

Matt

You're only looking at half of the issue-- how can you make any statements about the value of those who "shouldn't" be owning the site? The Coase Theorem could be functioning perfectly well-- it's impossible to make a determination either way. But the transactions costs are low, property rights are well defined and there have been sales of websites in the past-- I'm inclined to think things are working out just fine.

That wasn't a very "Chicago-school" post!

Pat Berry

I know Uzi Nissan and have bought computers and components from his shop. His business has been called Nissan Computer Corporation since the day it opened, and he registered the nissan.com domain in the early days of the Web in order to create a Web site for his business.

Anyone who claims that he is "cybersquatting" does not know what they are talking about. Nissan is his family name and the name of his business. He chose the domain name to match, and he did so years before Nissan Motor showed any interest in owning it.

Someone asked why Uzi didn't sell the domain name to Nissan Motor for a huge sum of money. He probably would have been happy to do so, but they never offered to buy it. Instead, their opening move was to sue him for ten million dollars and demand that he GIVE the domain to them.

MJK

What am I missing here? The Coase Theorem was about resolving externalities. The exchange of domain names is just about mutually beneficial gains from trade.

Lance Jonn Romanoff

"Similarly, WWF.com won't take you to the professional wrestling or the wildlife preservation home pages; instead, it essentially leads you nowhere."

The reason for that has to due with a 2002 lawsuit:

http://www.internetnews.com/bus-news/article.php/3_1038611

Gary

one think to consider: these "bargaining periods" are continuous and the positioning surrounding the negotiations is still ongoing in some cases.

max

Today I wanted to buy cool domain name. It was busy certainly! But to my huge surprise I saw that domain has not been captured by cybersquatters or pirates www.sedo.com or www.moniker.com.
And this domain is not for sale! By link I moved to the site. Incredible! The site (with such a scandal name) is social startup. Its popularity and content depends on the users fully and not on stupid bosses and big corporations! Its a pity, but I missed with its purchase. See yourself www.sexeyelash.com.
User decides everything himself.