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Non rivalry and complementarity in computer software

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  • Marengo, Luigi
  • Pasquali, Corrado

Abstract

In this paper we contend that – contrary to what argued by a vast part of the literature – computer software and, more in general, digital goods (i.e. symbolic strings on an electronic medium with some eco- nomic value) do not present the characteristics of a public good as they do not suffer from lack of rivarly and excludability any more than other durable goods which are regularly allocated on competitive markets. We argue instead that the “market allocation problem” – if any – with digital goods does not arise from their public nature but from some pe- culiar characteristics of the production technology. The latter presents the nature of a typical problem solving activity as far as the produc- tion of the first unit is concerned, this means that innovative activities in computer software are characterized by high degrees of interdepen- dencies, cumulativeness, sequentiality, path dependence and, more in general, sub-optimality arising from imperfect problem decompositions. As far as the production of further units is concerned, we observe in- stead high (but not infinite) expansibility and perfect codification (lack of any tacit dimension) which make diffusion costs rapidly fall. Given such claims, we argue that a standard “Coasian” approach to property rights, designed to cope with the externalities of semi-public goods may not be appropriate for computer software, as it may decrease both ex-ante incentives to innovation and ex-post efficiency of diffusion. On the other hand the institutional definition of property rights may strongly influence the patterns of technological evolution and division of labor in directions which are not necessarily optimal.

Suggested Citation

  • Marengo, Luigi & Pasquali, Corrado, 2006. "Non rivalry and complementarity in computer software," MPRA Paper 25589, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:25589
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    File URL: https://mpra.ub.uni-muenchen.de/25589/1/MPRA_paper_25589.pdf
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    References listed on IDEAS

    as
    1. Quah, Danny, 2003. "Digital Goods and the New Economy," CEPR Discussion Papers 3846, C.E.P.R. Discussion Papers.
    2. Hong, Lu & Page, Scott E., 2001. "Problem Solving by Heterogeneous Agents," Journal of Economic Theory, Elsevier, vol. 97(1), pages 123-163, March.
    3. Michele Boldrin & David Levine, 2002. "The Case Against Intellectual Property," American Economic Review, American Economic Association, vol. 92(2), pages 209-212, May.
    4. Marengo, Luigi & Dosi, Giovanni, 2005. "Division of labor, organizational coordination and market mechanisms in collective problem-solving," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 303-326, October.
    5. Quah, Danny, 2003. "Digital goods and the new economy," LSE Research Online Documents on Economics 2236, London School of Economics and Political Science, LSE Library.
    6. Herbert A. Simon, 2002. "Near decomposability and the speed of evolution," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(3), pages 587-599, June.
    7. Lu Hong & Scott E. Page, 1998. "Diversity and Optimality," Research in Economics 98-08-077e, Santa Fe Institute.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Rentocchini, Francesco, 2011. "Sources and characteristics of software patents in the European Union: Some empirical considerations," Information Economics and Policy, Elsevier, vol. 23(1), pages 141-157, March.

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    More about this item

    Keywords

    Intellectual property; hierarchies; innovation; software; digital goods;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • A11 - General Economics and Teaching - - General Economics - - - Role of Economics; Role of Economists

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