The Behavioral Economics of Music
In an attempt to revive a struggling record industry badly affected by digital piracy, the band Radiohead surprised their fans in 2007 by inviting them to decide how much they wanted to pay for their new album, including the option to simply download it for free. The album, In Rainbows, was downloaded over two million times, and the band reported a profit.
How to rate what you like?
How can we explain such generosity shown by the fans? One possible answer is that fans don’t always want the cheapest deal, but prefer to reciprocate a band’s kindness by giving something back. Now consider a music listener asked to give a rating to a song they’ve just heard. How might they go about this? The listener could be using mental shortcuts, known as heuristics, in making their assessment. They might base their evaluation on how they felt emotionally during the song or how familiar it was to them, or maybe they just liked the title.
Explanations for both the Radiohead case and music rating examples can be found by using behavioral economics. Behavioral economics is a branch of economics that departs from the traditional assumption that individuals are perfectly rational, purely self-interested, and able to make optimal decisions based on the information given to them. Instead, it takes a more realistic view of human behavior, integrating insights from a range of disciplines, including psychology and neuroscience. Behavioral economics has been successfully applied to a wide range of areas involving decision-making, from climate change to the promotion of healthy living, and now it has the potential to tackle the big issues in the music industry.
In a recently published article in the Quarterly Journal of Experimental Psychology, researchers Manuel Anglada-Tort (Max Planck Institute for Empirical Aesthetics) Nikhil Masters (The University of Manchester)and an international, interdisciplinary team of experts in music cognition, psychology, and economics demonstrate how behavioral economics can be applied in a variety of ways to improve music-related decision-making.
"Choice overload" can lead to negative impacts
For example, while the use of music streaming services instantly provides listeners with a large assortment of songs, people may be susceptible to a cognitive bias known as “choice overload.” Too much choice can lead to negative impacts on the listening experience, such as frequently changing tracks, choosing the first song option, or simply closing the music app altogether. Experiments have shown that organizing music according to different categories (e.g., genre, mood, activity) can reduce these adverse effects, especially when the music app is personalized to its user.
Another area in which behavioral economics could prove beneficial is music education. Although learning a musical instrument can be a personally satisfying and meaningful activity, it requires considerable effort in the form of regular practice, which may be difficult to achieve. A potential solution to this problem comes from a surprising source: studies on self-control and drug addiction. Behavioral economists have found that many people suffer from present-bias, i.e., a desire for immediate gratification so strong that it leads them to change a previously made decision. A music student affected with present-bias may wish to master their instrument, but as practice time looms, they instead procrastinate and find themself scrolling through their phone.
Behavioral economics improve our decisions related to music
Tools from behavioral economics could also help reduce barriers to attending concerts. These include not only measures aimed at changing the social norms associated with classical concerts (e.g., making music venues more accessible, relaxing the dress code, promoting a social community), but also advertising that challenges the stereotypes associated with classical music.
These are just a few examples of how behavioral economics can be applied to improve our decisions related to music. This new research area, known as Behavioral Economics of Music (BEM), represents a major advance in our understanding of music decision-making, and it paves the way for new interdisciplinary research positioned at the intersection of music, psychology, and economics.
Publication:
Anglada-Tort, M., Masters, N., Steffens, J., North, A., & Müllensiefen, D. (2022). The Behavioural Economics of Music: Systematic Review and Future Directions. Quarterly Journal of Experimental Psychology. Advance online publication. https://doi.org/10.1177/17470218221113761
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