| Abstract: |
This paper analyses the interdependency between the market for music
recordings and concert tickets, assuming that there are positive indirect
network effects both from the record market to ticket sales for live
performances and vice versa. In a model with two interrelated Hotelling lines
prices in both markets are corrected downwards when compared to the standard
Hotelling model. Also, file sharing has ambiguous effects on firms'
profitability. As file sharing can indirectly increase demand for live
performances overall profits can either increase or decrease, depending on the
strength of indirect network effects. Finally, file sharing may induce firms
to switch from the traditional business model with two separate firms to an
integrated business model where one agency markets both records and concerts
(so-called 360 degree deals). -- |