Difference between revisions of "Peitz and Waelbroeck (2006a)"
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|Authentic Link=http://www.sciencedirect.com/science/article/pii/S0167718705001682 | |Authentic Link=http://www.sciencedirect.com/science/article/pii/S0167718705001682 | ||
|Link=http://papers.ssrn.com/sol3/papers.cfm?abstract_id=829544 | |Link=http://papers.ssrn.com/sol3/papers.cfm?abstract_id=829544 | ||
− | |Reference=Conner and Rumelt (1991 | + | |Reference=Conner and Rumelt (1991); Takeyama (1994); Shy and Thisse (1999); Peitz and Waelbroeck (2003); |
|Plain Text Proposition=Do music labels necessarily suffer from downloading on P2P networks? Our analysis shows that the answer is 'no'. In our model, profits increase for a certain set of parameters because consumers can make more informed purchasing decisions because of sampling and are willing to spend for the original although they could consume the download for free. | |Plain Text Proposition=Do music labels necessarily suffer from downloading on P2P networks? Our analysis shows that the answer is 'no'. In our model, profits increase for a certain set of parameters because consumers can make more informed purchasing decisions because of sampling and are willing to spend for the original although they could consume the download for free. | ||
|FundamentalIssue=1. Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare, | |FundamentalIssue=1. Relationship between protection (subject matter/term/scope) and supply/economic development/growth/welfare, | ||
|EvidenceBasedPolicy=A. Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right), | |EvidenceBasedPolicy=A. Nature and Scope of exclusive rights (hyperlinking/browsing; reproduction right), | ||
|Discipline=L8: Industry Studies: Services, L82: Entertainment • Media | |Discipline=L8: Industry Studies: Services, L82: Entertainment • Media | ||
+ | |Description of Data=In the model profits increase for a certain set of parameters because consumers can make more informed purchasing decisions because of sampling and are willing to spend for the original although they could consume the download for free. | ||
+ | |Data Year=Not stated | ||
|Industry=Sound recording and music publishing; | |Industry=Sound recording and music publishing; | ||
|Cross-country=No | |Cross-country=No | ||
|Comparative=No | |Comparative=No | ||
+ | |Government or policy=No | ||
+ | |Literature review=No | ||
+ | }} | ||
+ | |Dataset={{Dataset | ||
+ | |Sample Size=3 | ||
+ | |Level of Aggregation=Consumption parameters, | ||
+ | |Data Material Year=Not stated | ||
}} | }} | ||
− | |||
}} | }} |
Revision as of 17:17, 7 October 2016
Contents
Source Details
Peitz and Waelbroeck (2006a) | |
Title: | Why the music industry may gain from free downloading — The role of sampling |
Author(s): | Peitz, M,, Waelbroeck, P. |
Year: | 2006 |
Citation: | Peitz, M., & Waelbroeck, P. (2006). Why the music industry may gain from free downloading—the role of sampling. International Journal of Industrial Organization, 24(5), 907-913. |
Link(s): | Definitive , Open Access |
Key Related Studies: | |
Discipline: | |
Linked by: | Piolatto and Schuett (2012) |
About the Data | |
Data Description: | In the model profits increase for a certain set of parameters because consumers can make more informed purchasing decisions because of sampling and are willing to spend for the original although they could consume the download for free. |
Data Type: | |
Secondary Data Sources: | |
Data Collection Methods: | |
Data Analysis Methods: | |
Industry(ies): | |
Country(ies): | |
Cross Country Study?: | No |
Comparative Study?: | No |
Literature review?: | No |
Government or policy study?: | No |
Time Period(s) of Collection: |
|
Funder(s): |
Abstract
Downloading digital products for free may harm creators and intermediaries because consumers may no longer buy the version for sale. However, as we show in this paper, this negative effect may be overcompensated by a positive effect due to sampling: consumers are willing to pay more because the match between product characteristics and buyers’ tastes is improved. This indeed holds under sufficient taste heterogeneity and product diversity. We present a simple multi-product monopoly model in which products are located on the Salop circle and in which consumers regard each original as superior to its copy. We first consider a model with unit demand and full participation so that any increase in revenues stems from higher prices. The property that sampling allows consumers to find a better match to their tastes, tends to lead to higher profits under file-sharing. However, there is a countervailing effect: consumers have the option to download and listen to music without paying for it. In other words, consumers have the option to simply keep the download but not to buy the song or album. This tends to make not buying a more attractive option and tends to reduce the willingness-to-pay for music. We show that the former effect dominates the latter and that the introduction of file-sharing technologies leads to higher profits if there is sufficient taste heterogeneity and sufficient product diversity. We then extend the model to allow for variable demand and show that file-sharing can lead to lower prices, higher unit sales and higher profits
Main Results of the Study
Do music labels necessarily suffer from downloading on P2P networks? Our analysis shows that the answer is 'no'. In our model, profits increase for a certain set of parameters because consumers can make more informed purchasing decisions because of sampling and are willing to spend for the original although they could consume the download for free.
Policy Implications as Stated By Author
Coverage of Study
Datasets
Sample size: | 3 |
Level of aggregation: | Consumption parameters |
Period of material under study: | Not stated |