The prices of classical recorded music: a hedonic approach

Author(s): Hamdad, M.

Journal/Book: Int J Ind Organ. 2000; 18: PO Box 211, 1000 AE Amsterdam, Netherlands. Elsevier Science Bv. 497-514.

Abstract: This paper is an empirical investigation into factors that are responsible for the differences in prices of classical music compact discs. Though primarily a statistical exercise, the current work has implications for understanding the structure, conduct and performance experienced by the classical music record industry. The major changes experienced by this industry are highlighted. We focus on the rapid technological change in recording technologies, format changes, the product heterogeneity that results from the simultaneous existence of incumbent and entering models with various technological vintages, and the behaviour of firms of different kinds. Using an as-yet-untapped French data source for the period 1989-1994, the results of hedonic regressions indicate that new vintages are priced at a premium, reflecting higher recording costs. Owing to contractual arrangements with superstars, this premium is even higher for recordings made by majors. The price markups enjoyed by major firms have declined over time because of increasing competitive pressure. Independents and majors exhibit a distinct behaviour as to the location of classical music CD's recordings in quality space. The results favour the hypothesis that independents locate their recordings in 'empty' market niches. The nominal quality-adjusted prices for independent firms' CDs declined at an annual average rate twice that of the majors.

Note: Article Harchaoui TM, Stat Canada, Jean Talon Bldg, 10-B6, Ottawa, ON K1A 0T6, CANADA

Keyword(s): PRODUCT

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