Theory of free trading markets for non-scarce goods and services and its application in electronic commerce of digital products.

Abstract

The Author brings forth principles and theory of primary and secondary free trading markets for non-scarce goods and services operating on principles of supply, demand and price discovery, and postulates that such markets can exist and contribute to the advancement of society and the world economy. Advances in science and technology have enabled digital duplication and the distribution of electronic content, and opened new pathways of doing business, but have also enabled illicit activities in digital goods, namely digital theft and piracy. An extremely low cost of copying, in a trivially short amount of time, has made digital copies of creative works practically non-scarce, thus destroying the equilibrium of supply and demand. As the majority of digital goods are currently sold and distributed on the Internet through retail outlets, which dictate prices and restrict users through monopolistic terms of use agreements, the rights of creators supersede the rights of consumers. Existing copyright laws serve as a legal basis for such operation of the markets. There are no pre-existing, legally operating secondary trading markets for digital goods, and primary markets do not utilise competitive price discovery, as only the copyright owners are entitled to set arbitrary trading prices. There is no pre-existing scientific framework for the operation of free trading markets for non- scarce goods to serve as a model for establishing electronic trading exchanges, for digital goods in particular, and non-scarce goods in general. This thesis provides a theoretical framework of free trading markets for non-scarce goods and services, as well as examples of practical applications for the theoretical framework in electronic commerce of digital goods and services. A software simulation of a free trading market for non- scarce goods, operating on the principles of this theoretical framework, is also provided. The applied theoretical framework is intended to create equitable trading of digital goods in a free market environment, provide a remedy for the growing piracy of digital goods, and enable investing in commoditised creativity, in a manner similar to investing in stocks or commodities