The Economic Properties of Software
AbstractSoftware is a good with very special economic characteristics. Taking a general definition of software as its starting-point, this article Â systematically elaborates the central qualities of the commodity which have implications for its production and cost structure, the demand, the contestability of software-markets, and the allocative efficiency. In this context it appears to be reasonable to subsume the various characteristics under the following generic terms: software as a means of data-processing, software as a system of commands or instructions, software as a recombinant system, software as a good which can only be used in discrete units, software as a complex system, and software as an intangible good. Evidently, software is characterized by a considerable number of economically relevant qualitiesâ€”ranging from network effects to a subadditive cost function to nonrivalry. Particularly to emphasise is the fact that software fundamentally differs from other information goods: First, from a consumerâ€™s perspective the readability and other aspects concerning how the information is presented, is irrelevant. Second, the average consumer/user is interested only in the funtionality of the algorithms but not in the underlying information.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2008-045.
Date of creation: 04 Jun 2008
Date of revision:
digital goods; compatibility; information good; network effects; nonrivalry; open source; recombinability; software;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-07 (All new papers)
- NEP-COM-2008-06-07 (Industrial Competition)
- NEP-DEV-2008-06-07 (Development)
- NEP-IPR-2008-06-07 (Intellectual Property Rights)
- NEP-LAW-2008-06-07 (Law & Economics)
- NEP-MIC-2008-06-07 (Microeconomics)
- NEP-NET-2008-06-07 (Network Economics)
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reading lists or Wikipedia pages:
- Open source in Wikipedia (English)
- User:Ajy019/sandbox in Wikipedia (English)
- オープンソースソフトウェア in Wikipedia (Japanese)
- Software in Wikipedia (English)
- Portal:Freie Software/Literatur in Wikipedia (German)
- Open-source software in Wikipedia (English)
- User:Neilmeena in Wikipedia (English)
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