{"title":"Contestability in the Digital Music Player Market","authors":"Wei Dai, Kam Yu","doi":"10.2139/ssrn.2736088","DOIUrl":null,"url":null,"abstract":"We test the concept of contestability in the digital music player market. The theory suggests that the threat of new entrants keeps firms’ market power in check. But Baumol and others argue that pure contestable markets rarely happen in reality. The portable music player market has been dominated by one producer. We estimate a quality-adjusted price index from 2002 to 2010. Results show that market prices decline at an average rate of about 20 percent per year, which is similar to other IT products. This provides support for the idea that the market is fairly contestable.","PeriodicalId":45683,"journal":{"name":"Journal of Industry Competition & Trade","volume":"19 1","pages":"293-311"},"PeriodicalIF":0.9000,"publicationDate":"2018-08-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Industry Competition & Trade","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.2736088","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q4","JCRName":"BUSINESS","Score":null,"Total":0}
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Abstract
We test the concept of contestability in the digital music player market. The theory suggests that the threat of new entrants keeps firms’ market power in check. But Baumol and others argue that pure contestable markets rarely happen in reality. The portable music player market has been dominated by one producer. We estimate a quality-adjusted price index from 2002 to 2010. Results show that market prices decline at an average rate of about 20 percent per year, which is similar to other IT products. This provides support for the idea that the market is fairly contestable.
期刊介绍：
The Journal of Industry, Competition and Trade (JICT) publishes research on the microeconomic foundations of industrial strategy, innovation, competition, and trade policy, concentrating on the functioning of markets for goods and services. The journal’s primary aim is to bridge the gaps between economic theory, empirical analysis and economic policy, and to provide a forum for applied theoretical research on policy questions. Journal of Industry, Competition and Trade promotes the combination of theories with facts, and encourages the incorporation of facts into model building. focuses on using applied theoretical research to arrive at policy conclusions, and encourages researchers to investigate policy questions. For example, game theoretical models that analyse the sources of and obstacles to innovation, the functioning of markets or strategic interactions are combined with empirical facts; and supporting empirical analysis is provided for models that explain how institutions, consumers and firms interact, how they shape their environment, and how incentives influence behaviour. Papers that analyse institutions and policy measures are expected to make explicit reference to theoretical models, while theoretical work is expected to include the analysis of empirical implications. The journal serves as a forum for dialogue between economists from academia and (national or international) policy circles. The composition of the Editorial Board, which includes academics as well as leading economists working at governmental and international organizations, facilitates exchanges between academia and economic policy. Officially cited as: J Ind Compet Trade
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