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Title:Indirect network effects with two Salop circles: the example of the music industry PDF Logo
Authors:Dewenter, Ralf
Haucap, Justus
Wenzel, Tobias
Issue Date:2009
Series/Report no.:Diskussionspapier // Technische Universität Ilmenau, Institut für Volkswirtschaftslehre 63
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.
Subjects:Music Industry
Indirect Network Effects
Salop Model
File Sharing
JEL:L13
L82
Z10
Document Type:Working Paper
Appears in Collections:Ilmenau Economics Discussion Papers, Technische Universität Ilmenau

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