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Digital Goods and the New Economy

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  • Danny Quah

Abstract

Digital goods are bitstrings, sequences of 0s and 1s, which have economic value. They are distinguished from other goods by five characteristics: digital goods are nonrival, infinitely expansible, discrete, aspatial, and recombinant. The New Economy is one where the economics of digital goods importantly influence aggregate economic performance. This Article considers such influences not by hypothesizing ad hoc inefficiencies that the New Economy can purport to resolve, but instead by beginning from an Arrow-Debreu perspective and asking how digital goods affect outcomes. This approach sheds light on why property rights on digital goods differ from property rights in general, guaranteeing neither appropriate incentives nor social efficiency; provides further insight into why Open Source Software is a successful model of innovation and development in digital goods industries; and helps explain how geographical clustering matters.

Suggested Citation

  • Danny Quah, 2003. "Digital Goods and the New Economy," CEP Discussion Papers dp0563, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0563
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    References listed on IDEAS

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    1. Quah, Danny, 2000. "Internet cluster emergence," European Economic Review, Elsevier, vol. 44(4-6), pages 1032-1044, May.
    2. Danny Quah, 2000. "Internet Cluster Emergence," CEP Discussion Papers dp0441, Centre for Economic Performance, LSE.
    3. Quah, Danny, 2000. "Internet cluster emergence," LSE Research Online Documents on Economics 2220, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Markus Pasche & Sebastian von Engelhardt, 2004. "Volkswirtschaftliche Aspekte der Open-Source-Softwareentwicklung," Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) 18/2004, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
    2. Michael Vogelsang, 2010. "Dynamics of two-sided internet markets," International Economics and Economic Policy, Springer, vol. 7(1), pages 129-145, May.
    3. Marengo, Luigi & Pasquali, Corrado, 2006. "Non rivalry and complementarity in computer software," MPRA Paper 25589, University Library of Munich, Germany.
    4. Markus Pasche, 2005. "(Self-)Regulation of a Natural Monopoly via Complementary Goods - the Case of F/OSS Business Models," Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) 18/2005, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
    5. Lewis Evans and Patrick Hughes, 2003. "Competition Policy in Small Distant Open Economies: Some Lessons from the Economics Literature," Treasury Working Paper Series 03/31, New Zealand Treasury.
    6. Daniel Chudnovsky & Andrés López & Martín Rossi & Diego Ubfal, 2006. "Evaluating a Program of Public Funding of Scientific Activity. A Case Study of FONCYT in Argentina," OVE Working Papers 1206, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
    7. repec:gam:jsusta:v:9:y:2017:i:12:p:2214-:d:120970 is not listed on IDEAS
    8. Patrick Legros, 2005. "Art and the Internet: Blessing the Curse?," Levine's Bibliography 666156000000000502, UCLA Department of Economics.
    9. Sebastian von Engelhardt, 2006. "Die ökonomischen Eigenschaften von Software," Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) 14/2006, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
    10. Sebastian von Engelhardt & Sushmita Swaminathan, 2008. "Open Source Software, Closed Source Software or Both: Impacts on Industry Growth and the Role of Intellectual Property Rights," Discussion Papers of DIW Berlin 799, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    aspatial; emergence; idea; information; innovation; intellectual asset; Internet; knowledge; Open Source; weightless economy;

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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