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We prove a Folk Theorem for asynchronously repeated games in which the set of players who can move in period t, denoted by I , is a random variable whose distribution t is a function of the past action choices of the players and the past realizations of I 's, Ž . s 1, 2, . . . , t y 1. We impose a condition, the finite periods of inaction FPI condition, which requires that the number of periods in which every player has at least one opportunity to move is bounded. Given the FPI condition together with the standard Ž . nonequivalent utilities NEU condition, we show that every feasible and strictly individually rational payoff vector can be supported as a subgame perfect equilibrium outcome of an asynchronously repeated game.

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We present a framework to evaluate the impact of digital music distribution. We set up a representative model that enables the comparative static analysis. We then interpret two empirical observations about the music industry, the sales decline and the price constancy, and fit the model to these observations. We find that, while the impact of digitalization on the producers' profits is probably negative, it may not be as severe as the observed impact on the quantity. On the other hand, the impact of digitalization on the consumer surplus is unambiguously positive. The impact on the social welfare is rather ambiguous, but numerical calculations reveal that the social welfare has increased for most parameter values. We also show that enhanced copyright protection to counteract the impacts of digitalization may have an unexpected effect on the social welfare. JEL Classification: K11; L86; O34