Carlos, del Cacho (2009): The Economics of Software Products: an Example of Market Failure.
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In this paper we examine pricing imperfections in software companies by analyzing the case of Microsoft, and we uncover the presence of pervasive dead-weight losses derived from the inability of the producer to achieve first degree price discrimination. Because the nature of software is such that it can be reproduced an infinite number of times at practically zero cost once the first copy is manufactured, the amount of these losses in terms of efficiency can be substantial, which opens the door for external intervention in the market. We finish by suggesting a simple policy rule in this direction, although the applicability may be limited to the theoretical realm, as it can distort the incentives of private enterprise as a provider of software products.
|Item Type:||MPRA Paper|
|Original Title:||The Economics of Software Products: an Example of Market Failure|
|Keywords:||pricing, efficiency, software industry|
|Subjects:||D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior ; Transaction Costs ; Property Rights
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General
|Depositing User:||Carlos del Cacho|
|Date Deposited:||30. Mar 2009 02:03|
|Last Modified:||12. Feb 2013 14:06|
Differential Pricing and Efficiency, Varian H. 1996
Available Versions of this Item
The Economics of Software Products: an Example of Market Failure. (deposited 30. Mar 2009 02:03)
- The Economics of Software Products: an Example of Market Failure. (deposited 13. Apr 2009 05:00)