Arnold Kling

Why do CD's Still Sell?

Arnold Kling, Great Questions of Economics
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Economist Stan Liebowitz thinks that it is puzzling that CD's still sell, given the volume of music downloading that takes place.

We have more downloads than legitimate sales; that's a very big market. You don't need sophisticated analysis to see a 30 percent drop in CD sales and to say that it wouldn't be due to a minor recession. And that's the kind of thing you should see if there's a massive amount of pirating that's much greater than what existed before.

What is surprising, according to Liebowitz, is that we do not see a 30 percent drop in CD sales.

Discussion Question. Music downloading can both substitute for and complement CD sales. What does the observed behavior say about the relative magnitude of these two effects?

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