We test the concept of contestability in the digital music player market. The theory suggests that the threat of new entrants keeps firms' market power in check. But Baumol and others argue that pure contestable markets rarely happen in reality. The portable music player market has been...

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...