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Indirect network effects with two Salop circles: the example of the music industry

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Author Info
Dewenter, Ralf
Haucap, Justus
Wenzel, Tobias

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Abstract

This paper analyses the interdependency between the market for music recordings and concert tickets, assuming that there are positive indirect network effects both from the record market to ticket sales for live performances and vice versa. Using a model with two interrelated Salop circles we show that prices in both markets are corrected down- wards when compared to the standard Salop model. Furthermore, we show that the effects of file sharing on firms' profitability and on variety are ambiguous. File sharing can increase profits through increased concert ticket demand and thereby also lead to additional market entry and additional variety. --

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Publisher Info
Paper provided by Ilmenau University of Technology, Institute of Economics in its series Discussion Papers with number 63.

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Date of creation: 2009
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Handle: RePEc:zbw:tuiedp:63

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Web page: http://www.tu-ilmenau.de/fakww/1398+M54099f70862.0.html

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Related research
Keywords: Music Industry; Indirect Network Effects; Salop Model; File Sharing;

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
Z10 - Other Special Topics - - Cultural Economics - - - General

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This page was last updated on 2009-12-2.

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