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Why the Music Industry May Gain from Free Downloading - the Role of Sampling

International University in Germany Working Paper No. 41/2005

12 Pages Posted: 2 Nov 2005  

Martin Peitz

University of Mannheim - Department of Economics

Patrick Waelbroeck

Telecom ParisTech

Date Written: October 2005

Abstract

Downloading digital products for free may harm creators and intermediaries because consumers may no longer buy the version for sale. However, as we show in this paper, this negative effect may be overcompensated by a positive effect due to sampling: consumers are willing to pay more because the match between product characteristics and buyers' tastes are improved. This indeed holds under sufficient taste heterogeneity and product diversity.

Keywords: file-sharing, P2P, sampling, information transmission, piracy, music

JEL Classification: L11, L82

Suggested Citation

Peitz, Martin and Waelbroeck, Patrick, Why the Music Industry May Gain from Free Downloading - the Role of Sampling (October 2005). International University in Germany Working Paper No. 41/2005. Available at SSRN: https://ssrn.com/abstract=829544 or http://dx.doi.org/10.2139/ssrn.829544

Martin Peitz (Contact Author)

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181-1835 (Phone)

HOME PAGE: http://peitz.vwl.uni-mannheim.de/

Patrick Waelbroeck

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

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