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Do Consumers Pay Voluntarily? The Case of Online Music

Tobias Regner and Javier A. Barria ()
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Javier A. Barria: Intelligent Systems + Networks group, Department of Electrical and Electronic Engineering, Imperial College London

No 2007-011, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: The paper analyses the payment behaviour of customers of the online music label Magnatune. Customers may pay what they want for albums, as long as the payment is within a given price range ($5-$18). Magnatune’s comprehensive pre-purchase access facilitates music discovery and allows an informed buying decision setting it apart from conventional online music stores. On average customers pay $8.20, far more than the minimum of $5 and even higher than the recommended price of $8. We analyse the relationship between artists/labels and customers in online music. We consider social preferences, in particular concerns for reciprocity. The resulting sequential reciprocity equilibrium corresponds to the observed pattern of behaviour. We conclude that Magnatune’s open contracts design can encourage people to make voluntary payments and may be a viable business option.

Keywords: social preferences; reciprocity; music industry; experience goods; psychological game theory; emotions (search for similar items in EconPapers)
JEL-codes: C24 C70 C93 D82 L82 (search for similar items in EconPapers)
Date: 2007-05-01
New Economics Papers: this item is included in nep-cbe, nep-cul and nep-mkt
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Do consumers pay voluntarily? The case of online music (2009) Downloads
Working Paper: Do Consumers Pay Voluntarily? The Case of Online Music (2009) Downloads
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