Buying, Sharing and Renting Information Goods

Author: Varian, Hal R.

Source: Journal of Industrial Economics, Volume 48, Number 4, December 2000 , pp. 473-488(16)

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Abstract:

Information goods such as books, journals, computer software, music and videos can be copied, shared, resold, or rented. When such opportunities for sharing are present, the content producer will generally sell a smaller amount at a higher price which may increase or decrease profits. I identify three circumstances where profits increase: (1) when the transactions cost of sharing is less than the marginal cost of production; (2) when content is viewed only a few times and transactions costs of sharing are low; and (3) when a sharing market provides a way to segment high-value and low-value users.

Document Type: Original article

DOI: http://dx.doi.org/10.1111/1467-6451.00133

Affiliations: 1: School of Information Management and Systems, University of California at Berkeley, CA 94720-4700, USA

Publication date: 2000-12-01