Economists Do It With Models

Warning: “graphic” content…

Bookmark and Share
Why The Adventures Of Tom Sawyer Should Be On Every Musician’s Kindle…

April 8th, 2011 · 10 Comments
Behavioral Econ · Music Biz

In my spare time, I work for a band. Part of this is for pure entertainment value and part is because I am interested in how the industry works (or doesn’t work), especially from a consumer behavior perspective. In talking with musicians and their managers, I hear a lot of statements of the form “people would think our stuff is great if only they would listen to it.” As an economist,my initial gut response is something of the form “well then pay them to listen to it.” According to chapter 1 of basically any introductory microeconomics textbook, the law of demand states that, except under very unusual circumstances, demand curves slope downwards:

(Do you like how I’ve started resorting to grabbing stock images off of the Internet?) It seems simple: if you want people to buy more of something, lower the price. Most people seem to assume that the limiting case of this law is a zero price: “offer something for free if you want to maximize consumption.” But no, not me, I am good at thinking outside of the box. Think about it- you can theoretically keep extending the demand curve down and to the right indefinitely. The problem is that you get into negative price territory, but isn’t a negative price just a case where you pay someone to consume something?

Apparently some musicians think the same way that I do. From Bostonist:

The Globe reported that the Jazz Composers Alliance Orchestra is going to pay their audience for an April 29 concert at the Cambridge YMCA Theater at 8 p.m. The first 50 concert goers get $1 for coming to the gig, and everyone has a chance to win $50 in a lottery. Don’t spend it all in one place.

Darrell Katz of the JCAO, a group performing in Boston since 1985, says it’s simply a way to promote the Orchestra. He said:

“We’ve got some of the top musicians in Boston in the group, and we’re writing music that deserves to be heard. I just want people to experience the joy of this music.”

Score one for the People’s Republic of Cambridge. Before you give me my music marketing gold star, however, I do have to acknowledge that there’s a little problem with this plan. Ever hear of a little boy named Tom Sawyer? Something about whitewashing a fence, perhaps? The fact of the matter is that whether we are paid to do something at least in part affects how much we think we like doing that activity.

If you don’t believe me, ask Dan Ariely. He, along with coauthors George Loewenstein and Drazan Prelec, have a paper entitled, not surprisingly, “Tom Sawyer and the Construction of Value” that empirically tests for the Tom Sawyer effect. To do so, Dan offered a group of his students one of two questions:

  • Would you be willing to pay Professor Ariely $10 for a 10-minute poetry reading?
  • Would you be willing to accept $10 from Professor Ariely for a 10-minute poetry reading?

He then asked students to bid on the opportunity to come to poetry readings of various lengths. (Bids could be either of the pay or be paid form.) As it turns out, students who were initially asked if they were willing to pay for the poetry were, for the most part, willing to pay for the event and vice versa. Economists generally take willingness to pay (or accept) as a measure of how much people like (or dislike) something, so the differences in bids can be interpreted as differences in the perceived pleasure (or displeasure) from the activity.

Hm. Based on this evidence, it seems that the Jazz Composers Alliance Orchestra is doing itself a bit of a disservice by offering to pay people to come to the show- essentially, they are framing it as an “unpleasant” activity where people need to be paid in order to attend. This is probably not going to help their longer-term marketing efforts, especially when you consider that $1 isn’t even a big enough incentive to truly move the needle on attendance in the short run. More importantly, the payment is even putting a damper on the whole “experience the joy of this music” thing.

G.I. Joe thinks that knowing is half the battle. I would argue that knowing a little economics is way more than half the battle. :)

P.S. I’ll have you know that I am a member of the Recording Academy. No joke.

(Don’t worry, said membership is not related to musical performance, I swear.)

Tags: Behavioral Econ · Music Biz

10 responses so far ↓

  • 1 Jack Jeckyl // Apr 8, 2011 at 11:32 pm

    I like how you dismiss your plagiarism with “grabbing stock images…”, nice. Oh and nobody uses Kindle.

  • 2 Chris // Apr 9, 2011 at 10:51 am

    Jack, I like how you prove your intelligence by passive aggressively bullying girls on the Internet. Please, do go on. Perhaps post a link to your blog? I googled “paragon of masculinity” but I didn’t find you….maybe it’s the browser on my Kindle (silly thing)

  • 3 Rev. Pfloyd // Apr 9, 2011 at 9:22 pm

    Well, even free music isn’t free because there is a time-cost too.

    I do the part-time musician hobby thing and have been given tons of free CDs that still remain unopened. Why? Because there is an opportunity cost involved; 5 minutes of listening to the woefully unproduced track on your locally-made CD is five less minutes in my car listening to an album I do like, or an EconTalk or Planet Money podcast, or “Moby Dick” on audiobook.

    So maybe paying me *would* work. But it’d have to be more than a dollar.

  • 4 Dan L // Apr 9, 2011 at 10:04 pm

    How is it that this post has nothing to do with Rush?

  • 5 Enrique // Apr 10, 2011 at 2:17 am

    Prices are set by confronting supply and demand, so analyzing a market with only one curve ( D, in this case ) can produce weird results.
    In other words, the question is not whether people are ready to be paid ( they are ,,, according to their time value ) but why someone would supply a product with a negative return. Since altruism is beyond the scope of “classical” economics, I come to the conclusion that the product supplied with negative price should be defined in a broader way ( for example, the product is the ( negative priced ) concert + the expected sales of CDs + the expected sales of drinks during the concert,,, etc.

  • 6 Rev. Pfloyd // Apr 11, 2011 at 9:45 am

    @Dan L: I most certainly measure time-costs as they relate to how much less time I have to listen to “Moving Pictures”!

  • 7 Frances Woolley // Nov 7, 2012 at 11:02 am

    Jodi – an alternative to grabbing images off the internet: use http://www.wolframalpha.com to generate your own. E.g. say you’ve given the students an assignment that involves graphing the demand curve p=10-2q. Go to wolramalpha.com and type plot 10-2q from q=0 to 5 . Then copy and paste the image into powerpoint, take 1 minute adding textboxes to label the axes, and you’re done. (I’m teaching intermediate micro in a room without a chalkboard this term, and necessity is the mother of invention).

  • 8 Frances Woolley // Nov 7, 2012 at 11:02 am

    Sorry, that site is wolframalpha.com.

  • 9 Lowell Amico // Nov 4, 2013 at 10:55 am

    Nice post. I be taught something more difficult on completely different blogs everyday. It will at all times be stimulating to read content from other writers and practice a little something from their store. I�d choose to use some with the content on my blog whether you don�t mind. Natually I�ll provide you with a link on your internet blog. Thanks for sharing.

  • 10 Darius Normington // Nov 7, 2013 at 10:10 pm

    An fascinating discussion is value comment. I feel that it is best to write more on this matter, it won’t be a taboo subject but usually individuals are not enough to speak on such topics. To the next. Cheers

Leave a Comment