Joeng and Lee (2010)
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Source Details
Joeng and Lee (2010) | |
Title: | Estimating Consumer Preferences for Online Music Services |
Author(s): | Jeong, G., Lee, J |
Year: | 2010 |
Citation: | Jeong, G., and J . Lee. 2010. “Estimating Consumer Preferences for Online Music Services”. Applied Economics 42(30); 3885-3893. |
Link(s): | Definitive |
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Cross Country Study?: | No |
Comparative Study?: | No |
Literature review?: | No |
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Abstract
This article analyses consumer preferences with regard to important attributes of online music services. Conjoint analysis and a random coefficient discrete choice model using Bayesian approach with Gibbs sampling are used to estimate the preferences. Based on the quantitative results, we use simulation to look at how a new pricing strategy and the threat of legal penalty for file sharing would influence the online music market. Findings include these: estimated willingness to pay for downloading one music file is significantly less than the actual price of the file; consumers are sensitive to longer search and download times for music files and very sensitive to the threat of legal action; and consumers are not sensitive to online music services broadening their catalogues. Finally, the simulation shows that a combination of increased transaction costs for illegal file sharing and lower-priced digital music files would inhibit illegal file sharing and bolster the number of people purchasing music legally from the online services.
Main Results of the Study
- estimated willingness to pay for downloading one music file is significantly less than the actual price of the file;
- consumers are sensitive to longer search and download times for music files and very sensitive to the threat of legal action;
- consumers are not sensitive to online music services broadening their catalogues;
- the simulation shows that a combination of increased transaction costs for illegal file sharing and lower-priced digital music files would inhibit illegal file sharing and bolster the number of people purchasing music legally from the online services.