Jun

20

Updated iTunes Index

June 20, 2006 | 2 Comments | Joshua Gans

One of my first blogging ideas (way back when) was the idea of using iTunes song prices rather than Big Mac prices to compare current exchange rates to purchasing power parity. I have posted today a new blog on Aplia which updates that Index (new numbers and more countries).

For Australia, the predictions for current exchange rates differ markedly between the two indexes. For the Big Mac index, the Australian dollar is been continually undervalued over its 20 year life. For the iTunes index, it is over-valued relative to the US dollar. Actually, for that index the US dollar is an anomaly probably because the US iTunes price is anomalous.


Comments

2 Responses to “Updated iTunes Index”

  1. derrida derider on June 20th, 2006 2:20 pm

    Surely this reflects more the relative pricing power of the record companies in the two countries than PPPs (since it is they rather than iTunes who have determined the price).

    Or more precisely, it reflects the relative judgements of their pricing power. I think in the case of Australia they’ve underestimated the (long run) elasticity of demand for these downloads and hence have priced well above the (long run) revenue maximising point.

    Mind you, the Big Mac index sometimes suffers from this sort of problem too. MacDonalds in 1990 in Moscow was a prestige good, where it was an inferior good in the US. This is on top of the better recognised problem that trade barriers make the relative price of beef (and food generally) vary greatly between, say, Japan and Australia.

  2. CoreEcon » Blog Archive » Hola, Mexico to the iTunes Index on November 21st, 2007 12:06 pm

    [...] Store with singles selling for 15 pesos a piece. Figured that was time for another update of the iTunes Currency Index. Notice that Mexicans are paying 38% more than those North for iTunes songs. An odd sort of price [...]