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Digital goods and the new economy

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  • Quah, Danny

Abstract

Digital goods are bitstrings, sequences of 0s and 1s, which have economic value. They are distinguished from other goods by five characteristics: digital goods are nonrival, infinitely expansible, discrete, aspatial, and recombinant. The New Economy is one where the economics of digital goods importantly influence aggregate economic performance. This Article considers such influences not by hypothesizing ad hoc inefficiencies that the New Economy can purport to resolve, but instead by beginning from an Arrow-Debreu perspective and asking how digital goods affect outcomes. This approach sheds light on why property rights on digital goods differ from property rights in general, guaranteeing neither appropriate incentives nor social efficiency; provides further insight into why Open Source Software is a successful model of innovation and development in digital goods industries; and helps explain how geographical clustering matters.

Suggested Citation

  • Quah, Danny, 2003. "Digital goods and the new economy," LSE Research Online Documents on Economics 121689, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121689
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    File URL: http://eprints.lse.ac.uk/121689/
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    References listed on IDEAS

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    1. Danny Quah, 2000. "Internet Cluster Emergence," CEP Discussion Papers dp0441, Centre for Economic Performance, LSE.
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    More about this item

    Keywords

    aspatial; emergence; idea; information; innovation; intellectual asset; internet; knowledge; open source; weightless economy;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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