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Selling Digital Goods on the Internet

Author

Listed:
  • Jens Leth Hougaard

    (Institute of Economics, University of Copenhagen)

  • Klavs Lindeneg

    (Institute of Economics, University of Copenhagen)

  • Mich Tvede

    (Institute of Economics, University of Copenhagen)

Abstract

Information goods are essentially public goods as soon as they are made available in digital form on the Internet. Therefore, firms (or providers) of informations goods are forced to consider alternative payment schemes to eliminate the free rider problem. The present paper introduces a mechanism by which a profit maximizing vendor announces a total price for making some information good available and potential users are making volutary contributions. It is shown that this mechanism eliminates the free rider problem under the assumption of complete information. The informational requirements are examined with respect to practical application and the mechanism is compared to a similar payment scheme launched by author Stephen King in an attempt to sell his novel "The Plant'' exclusively on the Web. Finally, a small field experiment will shed further light on the applicability of the proposed mechanism.

Suggested Citation

  • Jens Leth Hougaard & Klavs Lindeneg & Mich Tvede, 2002. "Selling Digital Goods on the Internet," Discussion Papers 02-09, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0209
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    Keywords

    information goods; public goods; selling mechanism; internet;
    All these keywords.

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