Economics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 6

Suppose Warner Music and Universal Music are in a duopoly and currently limit themselves to 10 new artists per year. One artist sells 2 million songs at $1.25 per song. However, each label is capable of signing 20 artists per year. If one label increases the number of artists to 20 and the other stays the same, the price per song drops to $0.75, and each artist sells 3 million songs. If both labels increase the number of artists to 20, the price per song drops to $0.30, and each artist sells 4 million songs.
a. Fill in the revenue payoffs for each scenario in Figure 15P-6

b. If this game is played once, how many artists will each producer sign, and what will be the price of a song?
c. If this game is played every year, how many artists will each producer sign, and what will be the price of a song?