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Gains from Digitization: Evidence from Gift-Giving in Music

Author

Listed:
  • Dogan, Pinar

    (Harvard University)

  • Bourreau, Marc

    (Telecom Paris Tech)

Abstract

In this paper, we focus on recorded music gifts during the holiday season and estimate the reduction in deadweight loss due to the transition from physical CD gift-giving to digital music gift-giving with gift cards. Based on our survey data, we find that music CD gifts generate an average deadweight loss between 15 and 38 percent of the price. According to our estimates of gift music album sales which are based on U.S. data, the welfare gains from digitization, in terms of eliminated deadweight loss as a percentage of total spending on music albums, were between 5 to 13 percent during the week when digital sales peak in 2014.

Suggested Citation

  • Dogan, Pinar & Bourreau, Marc, 2018. "Gains from Digitization: Evidence from Gift-Giving in Music," Working Paper Series rwp18-010, Harvard University, John F. Kennedy School of Government.
  • Handle: RePEc:ecl:harjfk:rwp18-010
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    File URL: https://research.hks.harvard.edu/publications/getFile.aspx?Id=1648
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    References listed on IDEAS

    as
    1. Joel Waldfogel, 2005. "Does Consumer Irrationality Trump Consumer Sovereignty?," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 691-696, November.
    2. Peitz, Martin & Waelbroeck, Patrick, 2006. "Why the music industry may gain from free downloading -- The role of sampling," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 907-913, September.
    3. Orit Tykocinski & Bradley J. Ruffle, 2000. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 90(1), pages 319-324, March.
    4. List, John A & Shogren, Jason F, 1998. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 88(5), pages 1350-1355, December.
    5. Kaplan, Todd R. & Ruffle, Bradley J., 2009. "In search of welfare-improving gifts," European Economic Review, Elsevier, vol. 53(4), pages 445-460, May.
    6. Waldfogel, Joel, 1998. "The Deadweight Loss of Christmas: Reply," American Economic Review, American Economic Association, vol. 88(5), pages 1358-1359, December.
    7. Waldfogel, Joel, 1993. "The Deadweight Loss of Christmas," American Economic Review, American Economic Association, vol. 83(5), pages 1328-1336, December.
    8. Prendergast, Canice & Stole, Lars, 2001. "The non-monetary nature of gifts," European Economic Review, Elsevier, vol. 45(10), pages 1793-1810, December.
    9. Solnick, Sara J & Hemenway, David, 1996. "The Deadweight Loss of Christmas: Comment," American Economic Review, American Economic Association, vol. 86(5), pages 1299-1305, December.
    10. Peitz, Martin & Waldfogel, Joel, 2012. "The Oxford Handbook of the Digital Economy," OUP Catalogue, Oxford University Press, number 9780195397840.
    11. John List & Jason Shogren, 1998. "The Deadweight Loss from Christmas: Comment," Artefactual Field Experiments 00531, The Field Experiments Website.
    12. Luis Aguiar & Joel Waldfogel, 2014. "Digitization, Copyright, and the Welfare Effects of Music Trade," JRC Working Papers on Digital Economy 2014-05, Joint Research Centre (Seville site).
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    More about this item

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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