Lagged Network Externalities and Rationing in a Software Monopoly

Corrado Di Maria and Johannes Köttl
Additional contact information
Johannes Köttl: Department of Economics and Finance, Institute for Advanced Studies
Authors registered in the RePEc Author Service: Johannes Koettl

No 120, Economics Series from Institute for Advanced Studies

Abstract: The paper presents a model of a software monopolist who benefits from a lagged network externality arising from consumers' feedback through the so-called bug-fixing effect. That is, the software producer is able to correct errors in the software code detected by previous users, improving her products over time. Another feature of the model is that it responds to the short life cycle of software products, implying time-of-purchase depending utility functions, which are in contrast to the usual durable goods models. Both of these modifications are incorporated in a standard two-periods durable goods monopoly, analysing questions of introductory pricing and quantity rationing. The model suggests that neither of these two instruments is able to explain why we see so much free software in the markets.

Keywords: Software monopoly; Lagged network externality; Introductory pricing; Rationing (search for similar items in EconPapers)
JEL-codes: D42 D45 L12 L86 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2002-07
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://irihs.ihs.ac.at/id/eprint/1444 First version, 2002 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ihs:ihsesp:120

Ordering information: This working paper can be ordered from
Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria

Access Statistics for this paper

More papers in Economics Series from Institute for Advanced Studies Josefstädterstr. 39, A-1080 Vienna, Austria. Contact information at EDIRC.
Bibliographic data for series maintained by Doris Szoncsitz ().