Princeton prof and digital music war hero Ed Felten speculates interestingly about the study released by two U. Penn professors on the effect of file-sharing on CD sales. Felten zeroes in on the "deadweight loss" concept; deadweight loss is destroyed value to the label or the consumer as a result of the cost of manufacturing or buying physical goods. When file-sharing helps a consumer avoid buying a poor CD, the consumer has avoided deadweight loss. Likewise, when a label prices a good CD above a consumer's reach, that is deadweight loss to the label. (The consumer's download displaces a sale.) Felten wonders whether some sort of price discrimination might cut into deadweight loss on both sides, to mutual benefit.

"But if the record companies can price-discriminate, that is, if they can charge different prices to different people, then they might be able to sell Alice the CD for $8 without lowering the price they charge anybody else. If they can somehow do this, they can eliminate the deadweight loss

"It's hard for record companies to price-discriminate in the traditional CD market, but maybe it's easier for them to price-discriminate by using online music services."

Read Felten for a more complete picture. Always read Felten. Every day. Starting today.