Music Variety and Retail Concentration
Telecom Paris Economics and Social Sciences Working Paper No. ESS-06-06
25 Pages Posted: 7 Apr 2006
Date Written: April 2006
In this paper, we examine the impact of horizontal and vertical market structure on product variety. We consider a market for horizontally differentiated products in which the cost of launching a new product is fixed and spread between the manufacturing and the retail industries. While this framework can be applied to a large number of industries we focus on music variety. We show that a vertically intergrated firm offers a wider variety of products than a chain of monopolies. If the cost of launching a new product is equally shared among the vertical structure or mostly supported by upstream firms, retail competition partially restores the incentives to innovate of the vertical structure. Yet when the cost of launching a new product is mostly supported by the retail sector, downstream competition leads to even more innovation than vertical integration.
Keywords: Music, variety, vertical relation, competition
JEL Classification: D43, L13, L22, L82
Suggested Citation: Suggested Citation