Concentration and non-price competition in the recording industry

Abstract

This paper examines the effect of varying levels of concentration on a certain type of non-price competition in the recording industry. That dimension of rivalry is the quantity of new recordings released which, as our analysis shows, is likely to be directly related to the degree of musical innovation and diversity offered by the industry. Two theoretical models of the effects of concentration on recording firm behavior are developed and empirical tests are derived to determine if either model correctly predicts industry behavior. Examination of two sets of data suggests that increases in concentration may have led to fewer releases of new recordings, possibly as a result of collusive conduct.