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Music for a Song: An Empirical Look at Uniform Pricing and Its Alternatives

Authors


  • We thank the Mack Center at Wharton for financial support. Tom Holmes provided helpful comments on an earlier draft, and we thank referees and the Editor for additional input. We are also grateful to seminar participants at Kellogg, Ohio State, Michigan, the NBER 2008 Summer Institute IO group, QME, INFORMS in Washington, and ZEW in Mannheim for comments. All errors are our own.

Abstract

With digital music as its context, this paper quantifies how much money would be made using alternatives to uniform pricing. Using survey-based data on nearly 1,000 students' valuations of 100 popular songs in early 2008 and early 2009, we find that various alternatives can raise both producer and consumer surplus. Digital music revenue could be raised by between a sixth and a third relative to profit-maximizing uniform pricing. While person-specific uniform pricing can raise revenue by over 50 per cent, none of the non-discriminatory schemes raise revenue's share of surplus above 40 per cent of total surplus.

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