Do Consumers Pay Voluntarily? The Case of Online Music
AbstractThe 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). Magnatuneâ€™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 Magnatuneâ€™s open contracts design can encourage people to make voluntary payments and may be a viable business option.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-011.
Date of creation: 01 May 2007
Date of revision:
social preferences; reciprocity; music industry; experience goods; psychological game theory; emotions;
Other versions of this item:
- Regner, Tobias & Barria, Javier A., 2009. "Do consumers pay voluntarily? The case of online music," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 395-406, August.
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-CBE-2007-05-12 (Cognitive & Behavioural Economics)
- NEP-CUL-2007-05-12 (Cultural Economics)
- NEP-MKT-2007-05-12 (Marketing)
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