We present a framework to evaluate the impact of digital music distribution. We set up a representative model that enables the comparative static analysis. We then interpret two empirical observations about the music industry, the sales decline and the price constancy, and fit the model to these...

File sharing systems such as Napster and KaZaA are accused by the recording industry of causing declines in sales of music CDs, and recently users of these systems are under lawsuit attack. However, there is not sufficient evidence that file sharing systems are responsible for the recent decline...