Freeware As An Advertisement

This paper examines the situation in which a monopolist offers freeware as an advertisement to increase the demand in order to maximize profit even though the existence of such freeware will reduce the power of the monopolist in the market. We prove that the successful application of freeware is dependent on the number of potential consumers and there exists an optimal quality design for freeware in this situation.Freeware; Software; Advertisement

Shareware competition: Selling an experience

A firm may allow customers to learn the value of its product prior to buying it. This increases their willingness to pay, even though it also leads some not to buy. That strategy may also be used as a competitive tool to increase its product's attractiveness. This paper examines competition between ex-ante identical firms that sell horizontally differentiated and mutually exclusive experience goods. Customers incur set-up costs when buying a good, but those set-up costs are partly recoverable if they then decide to buy the product of a competitor. The main conclusion from this paper is that while a firm that gives information about its product makes higher profits than a competing firm that chooses not to do so, a firm may however choose that last option in order to avoid being in direct competition with a firm that is more open about the value of its product.Experience goods, Transaction costs, Technical compatibility, Mechanism competition, information goods, sampling, switching costs

The Use of the Internet in Distributing Packaged Software

To reflect common practice in the software industry and extend transaction cost theory, this research developed building on previous research and empirically tested a model based on to identify conditions in which software vendors are likely to sell and distribute their packaged products directly to end-users through the Internet. How software firms distribute their products over the Internet is an important issue because software is a digital product, and the potential for the Internet to transform the distribution channel is considerable. Extant literature shows that Canadian software firms frequently choose direct instead of market channels. However, none of the existing studies focuses specifically on packaged software, or on the Internet as a distribution channel. Further, recent research on what products are suitable for distribution through the Internet does not address the case of packaged software. Knowledge-based asset specificity, human asset specificity, and physical asset specificity are positively associated with the likelihood of using the Internet to distribute packaged software (H1, H2, and H3). The likelihood of using the Internet in delivering products has a positive relationship with the volatility of packaged software, its clients, and markets (H4); whereas this likelihood has a negative relationship with diversity (H5). Channel growth is positively associated with the online distribution of packaged software (H6); Channel volume is negatively associated with the likelihood that packaged software developers use the Internet to deliver products (H7). The rate of growth in gross sales has a positive relationship with the likelihood of online distribution by packaged software firms (H8); while the gross sales of a firm negatively are associated with this likelihood (H9). The use of the Internet in the distribution of packaged software is positively associated with the United States market and negatively associated with other national markets (H10). The data to test these hypotheses were collected from Canadian software developers by a web-based survey. The information includes the distribution channels for their best selling product in its largest market, and Likert scales that measure forms of asset specificity, market uncertainty, and channel volume. The hypotheses are tested using logistic regression. The results provide support for hypotheses H5, H6, and H9 whiles hypotheses H1, H2, H4, H7, H8, and H10 are not supported. The result for H3 is statistically significant, but the direction of the relationship is the opposite of the expectation. The results of this study have implications both for theory and managerial practice. This research contributes to the literature a test of the ability of transaction cost analysis to explain the use of the Internet in distributing software. It also provides managers with reliable insights into some of the circumstances where packaged software developers may use the Internet to deliver their products. However, further research is required to verify the generalizability of the findings of this study

The economics of software distribution over the Internet revisited

Research on the information economy has been based on the assumption that production of software involves low, or even zero, marginal costs. This paper examines this assumption. It argues that the act of driving Internet traffic to an Internet server is an act of distribution and that costs associated with it are actually software production and distribution costs. It suggests a generalized model, the Internet distribution chain, using which the variable and marginal cost of production and distribution can be revealed. Using this model the paper will show that marginal costs associated with the production and distribution of software actually resemble those of traditional products