Economic Analysis of On-Line Music: Choice Between On-Line and Traditional Music Shops

The aim of this paper is to analyze the interaction between on-line and traditional music shops in order to understand the economic changes taking place in the music market. Music has been enjoyed since the emergence of human civilization, but until very recently only live performances could be experienced. The record industry emerged less than 100 years ago, in 1910. Today we can play CDs and MDs, as well as records and cassettes, indoors or outdoors. Recently we have seen the invention of digital music players such as Apple’s iPod and Toshiba’s Gigabit, which can play music after downloading digital music data from on-line music shops. The person can consider the various music media possibilities: CD from a traditional shop; CD from an on-line shop; Memory disc including music data from the terminals of the on-line music system in a shop; Hard disk including music data from an on-line shop. In fact, the person has to select a music medium taking into account the existence of music services from the supplier, the existence of music players and use of the Internet. In this paper the corresponding utility function is estimated using a rank-logit model.