• Selected
• Entire List

Abstract:
I present a model to assess the impact of demand-side factors on the concentration of sales within large product assortments. Consumers face a search problem within an assortment of horizontally differentiated products supplied by a monopolist. They may search for a product match by drawing products from the assortment or by seeking word of mouth recommendations from other consumers. Product evaluations prior to purchase and word of mouth are shown to arise endogenously, and increase the concentration of sales. I show that taste matching mechanisms such as recommender systems, which allow consumers to obtain product recommendations from others with similar preferences, reduce sales concentration by generating a long tail effect, an increase in the tail of the sales distribution. Insights are derived on the mechanisms driving concentration in artistic markets and their strategic implications for the firm. The model is suited for experience good markets such as music, cinema, literature and video game entertainment.

Search, Word of Mouth, Sales Concentration, Long Tail

Abstract:
We study competitive interaction between two alternative models of digital content distribution over the Internet: peer-to-peer (p2p) file sharing and centralized client-server distribution. We present microfoundations for a stylized model of p2p file sharing where all peers are endowed with standard preferences and show that the endogenous structure of the network is conducive to sharing by a significant number of peers, even if sharing is costlier than freeriding. We build on this model of p2p to analyze the optimal strategy of a profit-maximizing firm, such as Apple, that offers content available at positive prices. We characterize the size of the p2p network as a function of the firm's pricing strategy, and show that the firm may be better off setting high prices, allowing the network to survive, and that the p2p network may work more efficiently in the presence of the firm than in its absence.

Peer-to-Peer, Congestion, Mixed Duopoly

Abstract:
We present a model of bandwidth allocation in a stylized peer-to-peer file sharing network with s peers (sharers) who share files and download from each other and f peers (freeriders) who download from sharers but do not contribute files. Assuming that upload bandwidth is scarcer than download bandwidth and efficient allocation, we compute the expected bandwidth obtained by each peer. We show that (i) while the exact formula is complex, s/(s+f) is a good approximation and (ii) sharers (freeriders) obtain bandwidth larger (smaller) than s/(s+f). The paper constitutes a first step towards a general analytical foundation for scarce resource allocation in peer-to-peer file sharing networks.

Peer-to-Peer, Network formation, Resource allocation, Congestion