The Economics of Software Products: an Example of Market Failure

Carlos del Cacho

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we examine pricing imperfections in software companies by analyzing the case of Microsoft, and we uncover the presence of pervasive dead-weight losses derived from the inability of the producer to achieve first degree price discrimination. Because the nature of software is such that it can be reproduced an infinite number of times at practically zero cost once the first copy is manufactured, the amount of these losses in terms of efficiency can be substantial, which opens the door for external intervention in the market. We finish by suggesting a simple policy rule in this direction, although the applicability may be limited to the theoretical realm, as it can distort the incentives of private enterprise as a provider of software products.

Keywords: pricing; efficiency; software industry (search for similar items in EconPapers)
JEL-codes: D23 D40 (search for similar items in EconPapers)
Date: 2009-03-29
New Economics Papers: this item is included in nep-com
References: Add references at CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/14343/1/MPRA_paper_14343.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/14619/1/MPRA_paper_14619.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/14690/2/MPRA_paper_14690.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/17802/2/MPRA_paper_17802.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/17877/2/MPRA_paper_17877.pdf revised version (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:pra:mprapa:14343

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().