Quality predictability and the welfare benefits from new products: Evidence from the digitization of recorded music

Luis Aguiar, Joel Waldfogel

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

We explore the consequence of quality unpredictability for the welfare benefit of new products, using recent developments in recorded music as our context. We quantify the effects of new music on welfare using an explicit structural model of demand and entry with potentially unpredictable product quality. On the basis of plausible forecasting models of expected appeal, a tripling of the choice set according to expected quality adds substantially more consumer surplus as the usual long-tail benefits from a tripling of the choice set according to realized quality.

Original languageEnglish (US)
Pages (from-to)492-524
Number of pages33
JournalJournal of Political Economy
Volume126
Issue number2
DOIs
StatePublished - Apr 2018

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