|Speaker: Joel Waldfogel|
|The Wharton School|
Topic: Music for a Song: An Empirical Look at Uniform Song Pricing and its Alternatives
|Date/Place/Time: Friday, May 29, 2009 at 1:30PM-3:00PM
UCLA Anderson Entrepreneurs Hall C303
Economists have well-developed pricing theories that challenge the wisdom of the common practice of uniform song pricing. This paper explores the profit and welfare implications of various alternatives, including song-specific pricing, various forms of bundling, two-part tariffs, nonlinear pricing, and third-degree price discrimination, using survey-based data on nearly 500 students’ valuations of 50 popular songs in early January, 2008. We find that various alternatives – including simple schemes such as pure bundling and two-part tariffs – can raise both producer and consumer surplus. Revenue could be raised by nearly 10 percent relative to profit-maximizing uniform pricing and by over a fifth relative to current $0.99 uniform pricing. Moreover, revenue could be increased by a tenth while maintaining consumer surplus at the high level accompanying current $0.99 uniform song pricing. While person-specific uniform pricing can raise revenue by three quarters, none of the non-discriminatory schemes raise revenue’s share of surplus above 35 percent. Even with sophisticated pricing, much of the area under the demand curve for this product cannot be appropriated as revenue.
|Link to paper (if available): Click here (external site)|