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Do consumers pay voluntarily? The case of online music

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Author Info
Regner, Tobias
Barria, Javier A.
Abstract

The paper analyses the payment behaviour of customers of the online music label Magnatune. Customers may pay what they want for albums, as long as the payment is within a given price range ($5-$18). Magnatune's comprehensive pre-purchase access facilitates music discovery and allows an informed buying decision setting it apart from conventional online music stores. On average customers pay $8.20, far more than the minimum of $5 and even higher than the recommended price of $8. We analyse the relationship between artists/labels and customers in online music. We consider social preferences, in particular concerns for reciprocity. The resulting sequential reciprocity equilibrium corresponds to the observed pattern of behaviour. We conclude that Magnatune's open contracts design can encourage people to make voluntary payments and may be a viable business option.

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Publisher Info
Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 71 (2009)
Issue (Month): 2 (August)
Pages: 395-406
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:eee:jeborg:v:71:y:2009:i:2:p:395-406

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Web page: http://www.elsevier.com/locate/jebo

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Related research
Keywords: Social preferences Reciprocity Music industry Experience goods Psychological game theory Emotions;

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This page was last updated on 2009-12-19.


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