nep-cul New Economics Papers
on Cultural Economics
Issue of 2016‒10‒02
four papers chosen by
Roberto Zanola
Università degli Studi del Piemonte Orientale

  1. Quality Predictability and the Welfare Benefits from New Products: Evidence from the Digitization of Recorded Music By Luis Aguiar; Joel Waldfogel
  2. The Impact of Consumer Multi-homing on Advertising Markets and Media Competition By Athey, Susan; Calvano, Emilio; Gans, Joshua S.
  3. How Important Is Culture? A Second Look at Keller Williams Realty By Larcker, David F.; Tayan, Brian
  4. Socio-cultural Cleavages in Europe By BODOR, ÁKOS; GRÜNHUT, ZOLTÁN; HORECZKI, RÉKA

  1. By: Luis Aguiar; Joel Waldfogel
    Abstract: We explore the consequence of quality unpredictability for the welfare benefit of new products, using recent developments in recorded music as our context. Digitization has expanded consumption opportunities by giving consumers access to the “long tail” of existing products, rather than simply the popular products that a retailer might stock with limited shelf space. While this is clearly beneficial to consumers, the benefits are somewhat limited: given the substitutability among differentiated products, the incremental benefit of obscure products - even lots of them - can be small. But digitization has also reduced the cost of bringing new products to market, giving rise to a different sort of long tail, in production. If the appeal of new products is unpredictable at the time of investment, as is the case for cultural products as well as many others, then creating new products can have substantial welfare benefits. Technological change in the recorded music industry tripled the number of new products between 2000 and 2008. We quantify the effects of new music on welfare using a simple illustrative, but explicitly structural, model of demand and entry with potentially unpredictable product quality. Based on a range of plausible forecasting models of expected appeal, a tripling of the choice set according to expected quality adds substantially more to consumer surplus and overall welfare than the usual long-tail benefits from a tripling of the choice set according to realized quality, perhaps by more than an order of magnitude.
    JEL: L15 L81
    Date: 2016–09
  2. By: Athey, Susan (Stanford University); Calvano, Emilio (University of Bologna); Gans, Joshua S. (University of Toronto)
    Abstract: We develop a model of advertising markets in an environment where consumers may switch (or "multi-home") across publishers. Consumer switching generates inefficiency in the process of matching advertisers to consumers, because advertisers may not reach some consumers and may impress others too many times. We find that when advertisers are heterogeneous in their valuations for reaching consumers, the switching-induced inefficiency leads lower-value advertisers to advertise on a limited set of publishers, reducing the effective demand for advertising and thus depressing prices. As the share of switching consumers expands (e.g., when consumers adopt the internet for news or increase their use of aggregators), ad prices fall. We demonstrate that increased switching creates an incentive for publishers to invest in quality as well as extend the number of unique users, because larger publishers are favored by advertisers seeking broader "reach" (more unique users) while avoiding inefficient duplication.
    JEL: L11 L82
    Date: 2016–04
  3. By: Larcker, David F. (Stanford University); Tayan, Brian (Stanford University)
    Abstract: Keller Williams is one of the most successful real estate franchises in the world. The leaders of the company attribute its growth in large part to a cultural model that emphasizes profit sharing, interdependence, and success through the efforts of others. However, in general, the impact of culture on performance remains an open question. We conducted a large-scale survey of Keller Williams team members to understand how associates of Keller Williams view the company's culture and whether perceptions of culture are associated with performance. We find evidence of an exceptionally strong and unique culture. We review our findings in detail and ask: Does a company with a strong business model perform better if it also has a strong culture? How important is it that associates feel their company "cares" about them? What role does leadership play in shaping culture? What role does the average associate play? Are there costs to having a strong culture?
    Date: 2016–04
    Abstract: This paper investigates socio-cultural differences among European countries. The theoretical roots of our defined socio-cultural dimensions are elaborated in a multidisciplinary field. According to the considerable scientific literature, various socio-cultural aspects such as trust, tolerance, civic norms and social networks have a serious impact on the development potential of a country or a region. We empirically tested the characteristics of these socio-cultural aspects on the European Social Survey database. The main conclusion of the paper is that there is a definite socio-cultural cleavage between the northern/western and the Central and Eastern European countries.
    Keywords: Socio-cultural differences, Europe
    JEL: R0 R1 R11
    Date: 2015–02

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