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Contestability in the Digital Music Player Market

Author

Listed:
  • Wei Dai

    (University of Calgary)

  • Kam Yu

    (Lakehead University)

Abstract

We test the concept of contestability in the digital music player market. The theory suggests that the threat of new entrants keeps firms’ market power in check. But Baumol and others argue that pure contestable markets rarely happen in reality. The portable music player market has been dominated by one producer. We estimate a quality-adjusted price index from 2002 to 2010. Results show that market prices decline at an average rate of about 20 percent per year, which is similar to other IT products. This provides support for the idea that the market is fairly contestable.

Suggested Citation

  • Wei Dai & Kam Yu, 2019. "Contestability in the Digital Music Player Market," Journal of Industry, Competition and Trade, Springer, vol. 19(2), pages 293-311, June.
    • Handle: RePEc:kap:jincot:v:19:y:2019:i:2:d:10.1007_s10842-018-0284-5
    DOI: 10.1007/s10842-018-0284-5
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    References listed on IDEAS

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    Cited by:

    1. Tahiru Azaaviele Liedong, 2022. "The Liability of Tribe in Corporate Political Activity: Ethical Implications for Political Contestability," Journal of Business Ethics, Springer, vol. 181(3), pages 623-644, December.

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    More about this item

    Keywords

    Portable music players; iPods; Contestable markets; Price index;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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