ESTIMATING THE WILLINGNESS TO PAY FOR DIGITAL MUSIC

The general consensus among the copyright piracy literature is that economic incentives and enforcement are both effective strategies that complement one another in reducing the occurrence of piracy. Yet, the key factor underlying these strategies is the ability of the media industries to influence an individual's willingness to pay (WTP) for legal purchases when illegal versions exist. This article estimates the effects of factors influencing WTP for digital music downloads. Our results show that while income and risk perceptions play a dominant role in determining WTP, ethics are also important in influencing WTP. Our results are consistent with the growing consumer acceptance of fee-based music services that can exist alongside peer-to-peer file sharing as well as serve as a viable substitute . ( JEL O34, K42, D12)     

Consumers' Attitude Change Across Sequences of Successful and Unsuccessful Product Usage

In two experiments we examine how consumers are affected by a sequence composed of an initial product-failure experience followed by a success experience. Our interest is to assess how consumers' evaluation of the product and of their own performance change after the second experience. A preliminary experiment used hypothetical scenarios describing consumers' experiences with different products. In the main experiment, participants received actual hands-on experience with a Smith-Corona Personal Typewriter/Word Processor. A major result was that product evaluations could be as high following a failure-success sequence of experiences as following success alone. This was especially true with hands-on experiences. However, the main experiment showed that negative affect (frustration) expressed following an actual product failure experience remained even after a subsequent success. Marketing implications of these dual results are discussed.     

Long‐Run Consumption Risk and Asset Allocation under Recursive Utility and Rational Inattention

We study the portfolio decision of a household with limited information‐processing capacity (rational inattention [RI]) in a setting with recursive utility. We find that RI combined with a preference for early resolution of uncertainty could lead to a significant drop in the share of portfolios held in risky assets, even when the departure from the standard expected utility setting with full‐information rational expectations is small. In addition, we show that the equilibrium equity premium increases with the degree of inattention because inattentive investors with recursive utility face greater long‐run risk and thus require higher compensation in equilibrium.