This paper undertakes an econometric investigation of the impact of radio play on sales of sound recordings using a sample of American cities.
The results indicate that radio play does not have the positive impact on record sales normally attributed to it and instead appears to have an economically important negative impact, implying that overall radio listening is more of a substitute for the purchase of sound recordings than it is a complement.
This finding indicates that creating a set of property rights to allow this market to function properly is different than has been suggested by prior research. This research also exposes a fallacy of composition in applying to an entire market a generally accepted positive relationship that holds for individual units.
New technologies changing the nature of radio broadcasts are likely to make this topic increasingly important in the coming years.
