Working Paper: NBER ID: w10874
Authors: Rafael Rob; Joel Waldfogel
Abstract: Recording industry revenue has fallen sharply in the last three years, and some -- but not all -- observers attribute this to file sharing. We collect new data on albums obtained via purchase and downloading, as well as the consumers' valuations of these albums, among a sample of US college students in 2003. We provide new estimates of sales displacement induced by downloading using both OLS and an instrumental variables approach using access to broadband as a source of exogenous variation in downloading. Each album download reduces purchases by about 0.2 in our sample, although possibly much more. Our valuation data allow us to measure the effects of downloading on welfare as well as expenditure in a subsample of Penn undergraduates, and we find that downloading reduces their per capita expenditure (on hit albums released 1999-2003) from $126 to $100 but raises per capita consumer welfare by $70.
Keywords: music downloading; sales displacement; consumer welfare; college students
JEL Codes: L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| revenue loss from sales displacement (H27) | consumer surplus (D46) |
| downloading (C89) | purchases (M31) |
| downloading (C89) | revenue (H27) |
| downloading (C89) | consumer surplus (D46) |
| downloading (C89) | per capita expenditure on hit albums (E20) |