Music for a Song: An Empirical Look at Uniform Song Pricing and its Alternatives
59 Pages Posted: 5 Oct 2009 Last revised: 20 Jan 2023
Date Written: October 2009
Abstract
Economists have well-developed theories that challenge the wisdom of the common practice of uniform pricing. With digital music as its context, this paper explores the profit and welfare implications of various alternatives, including song-specific pricing, various forms of bundling, two-part tariffs, nonlinear pricing, and third-degree price discrimination. Using survey-based data on nearly 1000 students' valuations of 100 popular songs in early 2008 and early 2009. We find that various alternatives - including simple schemes such as pure bundling and two-part tariffs - can raise both producer and consumer surplus. 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 percent, none of the non-discriminatory schemes raise revenue's share of surplus above 40 percent of total surplus. Even with sophisticated pricing, much of the area under the demand curve for this product cannot be appropriated as revenue.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Music for a Song: An Empirical Look at Uniform Pricing and its Alternatives
-
Different Flavor, Same Price: The Puzzle of Uniform Pricing for Differentiated Products
-
Content or Community? A Digital Business Strategy for Content Providers in the Social Age
-
Effective Brand Community Management: Lessons from Customer Enthusiasts
By Utpal M. Dholakia and Silvia Vianello
-
The Challenge of Revenue Sharing with Bundled Pricing: An Application to Music
By Benjamin Shiller and Joel Waldfogel
-
Profit Leak? Pre-Release File Sharing and the Music Industry
-
The Determinants of Music Piracy in a Sample of College Students
-
Making Money by Giving It for Free: Radiohead's Pre-Release Strategy for In Rainbows
By Marc Bourreau, Pinar Dogan, ...