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The Economic Properties of Software

Author

Listed:
  • Sebastian von Engelhardt

    (Friedrich Schiller University Jena, School of Economics and Business Administration)

Abstract

Software is a good with very special economic characteristics. Taking a general definition of software as its starting-point, this article  systematically elaborates the central qualities of the commodity which have implications for its production and cost structure, the demand, the contestability of software-markets, and the allocative efficiency. In this context it appears to be reasonable to subsume the various characteristics under the following generic terms: software as a means of data-processing, software as a system of commands or instructions, software as a recombinant system, software as a good which can only be used in discrete units, software as a complex system, and software as an intangible good. Evidently, software is characterized by a considerable number of economically relevant qualities—ranging from network effects to a subadditive cost function to nonrivalry. Particularly to emphasise is the fact that software fundamentally differs from other information goods: First, from a consumer’s perspective the readability and other aspects concerning how the information is presented, is irrelevant. Second, the average consumer/user is interested only in the funtionality of the algorithms but not in the underlying information.

Suggested Citation

  • Sebastian von Engelhardt, 2008. "The Economic Properties of Software," Jena Economics Research Papers 2008-045, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2008-045
    as

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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2008/wp_2008_045.pdf
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    More about this item

    Keywords

    digital goods; compatibility; information good; network effects; nonrivalry; open source; recombinability; software;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets

    NEP fields

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    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. Portal:Freie Software/Literatur in Wikipedia German
    2. Perisian sumber terbuka in Wikipedia Malay
    3. Software de código aberto in Wikipedia Portuguese

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