Understanding the Challenges of the Digital Economy: The Nature of Digital Goods

This article investigates the economic nature and characteristics of digital goods. Such goods are, due to their replicability, shown to be public goods (albeit in an evolutionary way) and durable goods. Furthermore, the content of such goods, combined with their durability, makes them experience goods. While only one of these characteristics would be sufficient to create difficulties for producers and lead to market failure, this article demonstrates that each of the characteristics reinforces the other. The framework presented in the article is then applied to two important issues: the new trend of massive consumer piracy and the overall problem of value of digital goodsdigital goods, public goods, durable goods, experience goods, piracy.

Selling Digital Music: Business Models for Public Goods

This paper considers the market for digital music. We claim that the combination of the MP3 format and peer-to-peer networks has made music non-excludable and this feature is essential for the understanding of the economics of the music market. We study optimal business models for selling non-excludable goods and show that despite promising theoretical results, adding just a slight uncertainty about the number of customers has significant negative implications for profitability. Indeed, as the average number of customers tends to infinity the average payment per customer converges to zero. Therefore, the music industry should concentrate on alternative ways of creating profit such as selling access to listeners, concerts, merchandise, ringtones etc.digital music; experience good; public good; music industry; piracy

On Digital Sustainability and Digital Public Goods

Several 2022 reports from government and academic organisations contain the key message that sustainable development can be achieved using digital technologies. The report ‹Digital Reset› (Digitalization for Sustainability, 2022) calls for using digital technologies to reduce greenhouse gas emissions and resource waste in the agriculture, mobility, industry, and energy sectors. The researchers see digitalisation as a means to an end for sustainable transformation. Similarly, the report by the Coalition for Digital Environmental Sustainability (CODES, 2022), presents an action plan that includes impact initiatives to «achieve a sustainable planet in the digital age». The EU argues that digital technologies must play a key role in achieving climate neutrality in the EU by 2050 (Muench et al., 2022). The authors call for a ‹twin transition›, managing digital and green transitions simultaneously so that they reinforce each other

Digital Public Goods and vulnerable populations

The world faces wicked inequalities in global digital access, with nearly half of the world population (3,6 billion people) outside the connected world. The digital public goods (DPG) agenda envisions the rapid scaling and reach of information systems which can be easily implemented in a range of new contexts, to solve problems facing the most vulnerable in society. However, there is limited empirical data and theoretical knowledge to support how DPGs may facilitate or inhibit development outcomes. This panel will challenge ECIS attendees by bringing practitioners and academics together to address urgent questions about DPGs for sustainable development and showcase potential solutions toward sustainable digital futures for all

The Apple E-Book Agreement and Ruinous Competition: Are E-Goods Different for Antitrust Purposes?

Publishers have spent the last decade and a half struggling against falling prices for digital goods. The recent antitrust case against Apple and the major publishers highlights collusive price fixing as a potential method for resisting depreciation. This Article examines the myriad ways in which digital distribution puts downward pressure on prices, and seeks to determine whether or not collusive price fixing would serve as an appropriate response to such pressure given the goals of the copyright grant. Considering retailer bargaining power, increased access to substitutes, the loss of traditional price discrimination methods, the effects of vertical integration in digital publishing, and the increasing competitiveness of the public domain, I conclude that the resultant downward price pressure might in fact significantly hamper the commodity distribution of digital goods. I remain unconvinced, however, that price fixing is an appropriate solution. The copyright grant affords rights holders commercial opportunities beyond simple commodity distribution. These other methods for commercializing e-goods suggest to me that current pricing trends are not indicative of market failure, but rather of a changing marketplace

White Knight or Trojan Horse? The Consequences of Digital Rights Management for Consumers, Firms and Society

Due to its ability to solve all main problems associated with digital goods, Digital Rights Management is the favourite option used by companies to tackle piracy. The aim of this article is to discuss the consequences of DRM for consumers, firms and society. The rationales of DRM are discussed and the expected benefits for firms are presented.. In contrast, consumers are shown to be likely to see few benefits in DRM. This article demonstrates that even a standard DRM system is unlikely to improve social welfare. The article concludes with some public policy recommendations.Digital Rights Management, Digital Goods, Piracy, Excludability, Durability, Sampling.

Non rivalry and complementarity in computer software

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.Intellectual property; hierarchies; innovation; software; digital goods

Efficient Contracts for Digital Content

This paper analyses efficient contracts for digital content, focusing on the music industry. It contributes to the quest for an efficient intellectual property rights environment for information goods. Moreover, it adds an interesting application to the field of behavioural economics. The model is set in a contract theory framework with the copyright holder being the principal and a consumer the agent. We offer three contract cases for analysis: strong copy protection, a strategically low price and voluntary reciprocal contributions. Insights from the economics of information and behavioural economics - information goods have public goods properties; social preferences are significant among individuals - are applied to examine the value of a strict copyright enforcement in the digital age. We find that endogenous incomplete contracts based on fair, reciprocal behaviour may achieve a first-best allocation of information goods, while complete contracts are limited to second-best results.internet, music industry, social preferences, reciprocity, moral hazard, file sharing