Market Formation as Transitive Closure: the Evolving Pattern of Trade in Music

TL;DR

This paper models global music trade as a network where new markets emerge through transitive closure driven by shared social influences and consumption patterns, highlighting the role of foreign product consumption in market development.

Contribution

It introduces a network model linking market formation to transitive closure and social influence, providing a longitudinal analysis of international music trade from 1976 to 2010.

Findings

New markets form through transitive closure in trade networks.

Shared foreign product consumption facilitates market development.

Social influences shape the evolution of international trade patterns.

Abstract

Where do new markets come from? I construct a network model in which national markets are nodes and flows of recorded music between them are links and conduct a longitudinal analysis of the global pattern of trade in the period 1976 to 2010. I hypothesize that new export markets are developed through a process of transitive closure in the network of international trade. When two countries' markets experience the same social influences, it brings them close enough together for new homophilous ties to be formed. The implication is that consumption of foreign products helps, not hurts, home-market producers develop overseas markets, but only in those countries that have a history of consuming the same foreign products that were consumed in the home market. Selling in a market changes what is valued in that market, and new market formation is a consequence of having social influences in common.