Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71205
Authors: 
Maria, Corrado Di
Köttl, Johannes
Year of Publication: 
2002
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 120
Abstract: 
The paper presents a model of a software monopolist who benefits from a lagged network externality arising from consumers' feedback through the so-called bug-fixing effect. That is, the software producer is able to correct errors in the software code detected by previous users, improving her products over time. Another feature of the model is that it responds to the short life cycle of software products, implying time-of-purchase depending utility functions, which are in contrast to the usual durable goods models. Both of these modifications are incorporated in a standard two-periods durable goods monopoly, analysing questions of introductory pricing and quantity rationing. The model suggests that neither of these two instruments is able to explain why we see so much free software in the markets.
Subjects: 
software monopoly
lagged network externality , introductory pricing
rationing
JEL: 
L12
L86
D42
D45
Document Type: 
Working Paper

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