Advanced Search
MyIDEAS: Login to save this paper or follow this series

Functional Quality Degradation of Software with Network Externalities

Contents:

Author Info

  • Jong-Hee Hahn

    ()
    (Department of Economics University of Keele)

Abstract

This paper considers a functional quality degradation of software with twoway features (such as reading and writing in word-processors). A software monopolist differentiates products by introducing a functionally down-graded version (e.g. the read-only version) by eliminating some functions of the full version. A simple two-type model is presented to explain the firm’s incentive to introduce a functionally down-graded version. It is shown that the functional quality degradation is an effective consumer screening device, especially when consumers’ valuation for each function is negatively correlated. With network externalities, the firm may wish to offer the down-graded good below cost or even free of charge in many cases (including the case where introducing the quality-degraded version does not involve a market expansion). The welfare consequence of this kind of quality degradation is generally ambiguous, and critically depends on how the total market size changes by the introduction of the quality-degraded version.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.keele.ac.uk/depts/ec/wpapers/0012.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Department of Economics, Keele University in its series Keele Department of Economics Discussion Papers (1995-2001) with number 2000/12.

as in new window
Length: 20 pages
Date of creation: 2000
Date of revision: Jan 2001
Publication status: Published in Journal of Industrial Economics, Volume 54, Issue 2, June 2006, pages 253-268 (revised version with G. Csorba). [ doi:10.1111/j.1467-6451.2006.00282.x ]
Handle: RePEc:kee:keeldp:2000/12

Contact details of provider:
Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Phone: +44 (0)1782 584581
Fax: +44 (0)1782 717577
Email:
Web page: http://www.keele.ac.uk/depts/ec/cer/
More information through EDIRC

Order Information:
Postal: Department of Economics, Keele University, Keele, Staffordshire ST5 5BG - United Kingdom
Email:
Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm

Related research

Keywords: Software; Network Externalities; Quality Differentiation; FunctionalDegradation.;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Martin Peitz & Patrick Waelbroeck, 2003. "Piracy of Digital Products: A Critical Review of the Economics Literature," CESifo Working Paper Series 1071, CESifo Group Munich.
  2. Jong-Hee Hahn, 2002. "Damaged Durable Goods," Keele Economics Research Papers KERP 2002/21, Centre for Economic Research, Keele University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kee:keeldp:2000/12. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin E. Diedrich) The email address of this maintainer does not seem to be valid anymore. Please ask Martin E. Diedrich to update the entry or send us the correct address.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.