Gains from digitization: Evidence from gift-giving in music

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Authors: Marc Bourreau and Pinar Dogan
Date: May 2018
Publisher: Elsevier B.V.
Document Type: Report
Length: 331 words

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Abstract :

Keywords Gift-giving; Deadweight loss; Digitization; Music Highlights * We propose a binary-choice approach to elicit the value of the gifts to the recipients. * Music CD gifts during the holiday season generate an average deadweight loss between 15% and 38% of the price. * The welfare gains from digitization (in terms of eliminated deadweight loss as a percentage of total spending on music albums) were between 5% and 13% during the week when digital sales peak in 2014. Abstract In this paper, we focus on recorded music gifts during the holiday season and estimate the reduction in deadweight loss due to the transition from physical CD gift-giving to digital music gift-giving with gift cards. Based on our survey data, we find that music CD gifts generate an average deadweight loss between 15% and 38% of the price. According to our estimates of gift music album sales which are based on U.S. data, the welfare gains from digitization, in terms of eliminated deadweight loss as a percentage of total spending on music albums, were between 5% and 13% during the week when digital sales peak in 2014. Author Affiliation: (a) Telecom ParisTech, Department of Economics and Social Sciences, Paris, France (b) John F. Kennedy School of Government, Harvard University, Cambridge, MA, UK * Corresponding author. Article History: Received 16 June 2017; Revised 28 February 2018; Accepted 4 March 2018 (footnote)[white star] Pinar Dogan thanks the Institute of Advanced Study in Princeton, NJ, for its hospitality and Eldar Shafir and Anandi Mani for their valuable suggestions during the early stages of this paper. We also thank Dani Rodrik, Maciej Kotowski, Gergely Dobos, the participants at the Advances in the Economics of Organization and the New Economy Conference held in Toulouse in June 2016, the Editor and anonymous referees of this journal for their comments and suggestions. Finally, we thank Edouard Mifsud and Hugo Zylberberg for their research assistance, and Grant Rafter for editorial assistance. Byline: Marc Bourreau [marc.bourreau@telecom-paristech.fr] (a), Pinar Dogan [pinar_dogan@hks.harvard.edu] (b,*)

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Gale Document Number: GALE|A540987660