Spotify account gives a budget of audiobook hours before needing to pay for more hours, but if you listen to a 10-hour book at double-speed (so 5 listening hours), it counts as 10 hours of your budget. So they price r-speed listening at exactly r times that of unit-speed listening.
Fun micro #econsky problem set question: If p is the price Spotify charges for unit-speed listening (replacing a budget with a price for simplicity) and r>1, should they price r-speed listening =rp, >rp, or
Assuming there's no cost associated with providing the content at the increased speed it should be =rp, reason being the allowance being quoted as hours of listening is only a proxy for content. Speed through a section, hear it anyway. If this was print would they want to reward having a magnifier?
This could be an argument for fairness of the "=rp" answer.
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I think I disagree, but I’m curious about your reasoning.
Ugh i keep confusing myself and second guessing and deleting the wrong thing. I meant to ask, is P the price of a book or the price of listening time?
Your way of phrasing is way better: if I listen to a book at double speed, should Spotify want to charge me more (>rp), less (
The simple logic for greater than is that reads demand increases and price increases along the upward sloping supply curve. The simple logic for less than would be economies of scale.
I lean toward the latter because i don't think royalties are that large for most books and because bandwidth for audio isn't so substantial to make marginal cost increase too much because of the faster and higher volume listeners.
My reasoning: the marginal cost is negligible relative to revenue, so it's a demand question. I think charging more to listen double-speed is effective price discrimination, since I would guess the people that want the fast version are less price-elastic.
Yup. So it sounds like we agree on economies of scale but it may also depend on the nature of the imperfect competition. Another twist would be on whether the fast listeners can download, which would mess up the ability to price discriminate.
I think there’s still an opportunity for price discrimination since the thing you’re screening on is how much time people are happy to spend on consuming the same content. And extra steps take time—so it’s similar to coupon clipping as price discrimination.