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Non rivalry and complementarity in computer software


Author Info

  • Marengo, Luigi
  • Pasquali, Corrado


In this paper we contend that – contrary to what argued by a vast part of the literature – computer software and, more in general, digital goods (i.e. symbolic strings on an electronic medium with some eco- nomic value) do not present the characteristics of a public good as they do not suffer from lack of rivarly and excludability any more than other durable goods which are regularly allocated on competitive markets. We argue instead that the “market allocation problem” – if any – with digital goods does not arise from their public nature but from some pe- culiar characteristics of the production technology. The latter presents the nature of a typical problem solving activity as far as the produc- tion of the first unit is concerned, this means that innovative activities in computer software are characterized by high degrees of interdepen- dencies, cumulativeness, sequentiality, path dependence and, more in general, sub-optimality arising from imperfect problem decompositions. As far as the production of further units is concerned, we observe in- stead high (but not infinite) expansibility and perfect codification (lack of any tacit dimension) which make diffusion costs rapidly fall. Given such claims, we argue that a standard “Coasian” approach to property rights, designed to cope with the externalities of semi-public goods may not be appropriate for computer software, as it may decrease both ex-ante incentives to innovation and ex-post efficiency of diffusion. On the other hand the institutional definition of property rights may strongly influence the patterns of technological evolution and division of labor in directions which are not necessarily optimal.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25589.

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Date of creation: 2006
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Handle: RePEc:pra:mprapa:25589

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Related research

Keywords: Intellectual property; hierarchies; innovation; software; digital goods;

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  1. Hong, Lu & Page, Scott E., 2001. "Problem Solving by Heterogeneous Agents," Journal of Economic Theory, Elsevier, Elsevier, vol. 97(1), pages 123-163, March.
  2. Luigi Marengo & Giovanni Dosi, 2003. "Division of Labor, Organizational Coordination and Market Mechanism in Collective Problem-Solving," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2003/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  3. Lu Hong & Scott E. Page, 1998. "Diversity and Optimality," Research in Economics, Santa Fe Institute 98-08-077e, Santa Fe Institute.
  4. Danny Quah, 2003. "Digital Goods and the New Economy," CEP Discussion Papers, Centre for Economic Performance, LSE dp0563, Centre for Economic Performance, LSE.
  5. Boldrin, Michele & Levine, David, 2002. "The Case Against Intellectual Property," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3273, C.E.P.R. Discussion Papers.
  6. Herbert A. Simon, 2002. "Near decomposability and the speed of evolution," Industrial and Corporate Change, Oxford University Press, vol. 11(3), pages 587-599, June.
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Cited by:
  1. Francesco Rentocchini, 2010. "Sources and characteristics of software patents in the European Union: some empirical considerations," Openloc Working Papers, Public policies and local development 1022, Public policies and local development.


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