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Competitive Provision of Digital Goods

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Abstract

We study the distribution of goods that are freely duplicated and damaged. The monopolist solves a screening problem that is not cost-separable and requires a concave-linear preference specification to generate nontrivial allocations, associated with two interdependent inefficiencies: underacquisition and damaging. In a game where firms acquire market power through an irreversible investment, both monopoly and active competition emerge as equilibria. Despite worsening underacquisition and inducing double-spending, competition may increase welfare because it mitigates the damaging inefficiency by distributing a version for free. We discuss an application to information markets, where experts produce a signal and sell Blackwell-garbled versions of it.

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  • Elia Sartori, 2024. "Competitive Provision of Digital Goods," CSEF Working Papers 719, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    • Handle: RePEc:sef:csefwp:719
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