Contestability in the Digital Music Player Market

22 Pages Posted: 22 Feb 2016 Last revised: 23 Jul 2019

See all articles by Wei Dai

Wei Dai

University of Calgary

Kam Yu

Lakehead University

Date Written: July 22, 2019


We test the concept of contestability in the digital music player market. The theory suggests that the threat of new entrants keeps firms' market power in check. But Baumol and others argue that pure contestable markets rarely happen in reality. The portable music player market has been dominated by one producer. We estimate a quality-adjusted price index from 2002 to 2010. Results show that market prices decline at an average rate of about 20 percent per year, which is similar to other IT products. This provides support for the idea that the market is fairly contestable.

Keywords: portable music players, iPods, contestable markets, price index

JEL Classification: L11, C43

Suggested Citation

Dai, Wei and Yu, Kam, Contestability in the Digital Music Player Market (July 22, 2019). Available at SSRN: or

Wei Dai

University of Calgary ( email )

University Drive
Calgary, Alberta T2N 1N4

Kam Yu (Contact Author)

Lakehead University ( email )

Thunder Bay, P7B 5E1


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