A note on elasticity and price dispersions in the music recording industry

The present note examines price dispersions in the music recording industry between new release and mid-line (older) recordings. The model employs the framework developed within the industrial economics literature and provides empirical results suggesting that new release prices are lower than those of mid-level recordings. This result follows from differing buyer characteristics and varying levels of close substitutes, leading to higher demand elasticities for new release recordings. Finally, the theoretical expectations should hold in the presence of either significant scale economies or modest minimum efficient scales of production.