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CMNS 230 (8)

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CMNS 230
David Newman

WEEK 3 Curious Economics Grant 4 • How do markets determine what we watch, read and listen to? 2 • How do cultural products behave in the market place? • How are they distributed and sold? 4 • Ordinary commodities are essentially utilitarian, cultural products contribute 3 to intellectual discourse • Like ordinary commodities, cultural products respond to forces of supply, demand and competition 44 TABLE 3.1: Why Cultural Products Are Not Like Ordinary Commodities Attribute Ordinary Commodity Nature of utilitarian purpose Product Nature of assembly line (each unit requires Production significant resources) Process Marginal Cost of significant 45 Unit of Product Predictability of largely predictable Demand Substitutability large degree of substitutability with competing brands Time Line of Demand for product continues Demand indefinitely until next product cycle (measured in years) Who Determines ultimate consumer Demand Setting the Price Non-discriminatory; arbitrage precludes market differentiation Pricing Latitude dependent on competitive forces of demand and supply; constrained by significant marginal cost and non- discriminatory pricing Nature of each unit of product is consumed Consumption and not available to others Time Line of continued advertising over years Advertising to reinforce brand . 4 NATURE OF PRODUCT 6 • Basic nature of cultural product is to communicate ideas and emotions, ordinary products serve a utilitarian purpose • Value of cultural product is in its symbolic or representational content, not its physical form or utilitarian attributes • Experienced good, rather than consumed/employed good • Creators of cultural products are not purely profit-seeking, “art for art’s sake”  Oversupply of creative products far exceeding demand NATURE OF PRODUCTION PROCESS • Cultural products involve expensive, time-consuming one-time process of creation; most cost incurred to make master copy that can be cheaply stored, 4 duplicated and delivered and is never consumed; large production cost are 7 “sunk” (cannot be avoided) regardless of whether the product eventually sells or not • Ordinary commodities are produced in many copies on an assembly line, each product unit/copy requires expensive resources; losses can be cut by ceasing to make products that don’t sell MARGINAL COST OF ADDITIONAL UNITS • Cultural goods: once master copy is created, making additional copies incurs insignificant marginal costs • Conventional commodities: additional copies require additional raw materials and pre-manufactured sub-components, need continuous capacity for production, assembly, and packaging -> marginal cost of additional unit is significant NATURE OF CONSUMPTION • Ordinary commodities are consumed and then are no longer available to anyone else • Cultural products have their value in the conveyance of an experience, they 4 are “non-rival” goods meaning their use by one person does not limit its use 8 by another PREDICTABILITY OF DEMAND (“NOBODY KNOWS”) • The demand of ordinary commodities is somewhat predictable; once consumed consumers know what to expect; • Each cultural wor
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