Indirect network effects with two Salop circles: the example of the music industry
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.
|Date of creation:||2009|
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- Mark Armstrong, 2005.
"Competition in Two-Sided Markets,"
- Reisinger, Markus & Schnitzer, Monika, 2008.
"A Model of Vertical Oligopolistic Competition,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
228, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Reisinger, Markus & Schnitzer, Monika E, 2008. "A Model of Vertical Oligopolistic Competition," Department of Economics, Working Paper Series qt3n9000fg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Reisinger, Markus & Schnitzer, Monika, 2008. "A Model of Vertical Oligopolistic Competition," Discussion Papers in Economics 3189, University of Munich, Department of Economics.
- Reisinger, Markus & Schnitzer, Monika, 2008. "A Model of Vertical Oligopolistic Competition," CEPR Discussion Papers 6730, C.E.P.R. Discussion Papers.
- Nicolas Curien & Francois Moreau, 2009. "The Music Industry in the Digital Era: Toward New Contracts," Journal of Media Economics, Taylor & Francis Journals, vol. 22(2), pages 102-113.
- 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.
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