Music Variety and Retail Concentration

Telecom Paris Economics and Social Sciences Working Paper No. ESS-06-06

25 Pages Posted: 7 Apr 2006

See all articles by Marie-Laure Allain

Marie-Laure Allain

Ecole Polytechnique, Paris - Department of Economic Sciences

Patrick Waelbroeck

Telecom ParisTech

Date Written: April 2006

Abstract

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

Allain, Marie-Laure and Waelbroeck, Patrick, Music Variety and Retail Concentration (April 2006). Telecom Paris Economics and Social Sciences Working Paper No. ESS-06-06. Available at SSRN: https://ssrn.com/abstract=895131 or http://dx.doi.org/10.2139/ssrn.895131

Marie-Laure Allain (Contact Author)

Ecole Polytechnique, Paris - Department of Economic Sciences ( email )

Palaiseau, 91128
France

Patrick Waelbroeck

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

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