Music Royalty Rates for Different Business Models: Lindahl Pricing and Nash Bargaining

Definition

The Lindahl Equilibrium and Nash Bargaining Solution serve as useful and complementary analytical tools that provide guiding principles for the determination of appropriate music royalty rates in the current digital era, which poses challenges and pitfalls for the pricing of information goods, most notably musical works and sound recordings.

Introduction

We discuss the economic concepts of Lindahl Equilibrium and Nash Bargaining Solution as useful and complementary analytical tools in the context of the current digital era, which poses challenges and pitfalls for the pricing of information goods, most notably musical works and sound recordings. These concepts of modern economic theory are more than ever useful, even required, to provide the guiding principles underlying the determination of appropriate music royalty rates.

There is a general agreement between rightsholders, copyright users, and tariff-setting organizations that tariffs should be “fair and equitable” to both...