Digital Goods and the New Economy

47 Pages Posted: 23 May 2003

See all articles by Danny Quah

Danny Quah

National University of Singapore (NUS), Lee Kuan Yew School of Public Policy

Date Written: March 2003

Abstract

Digital goods are bit strings, sequences of 0s and 1s, that have economic value. They are distinguished from other goods by five characteristics: digital goods are non-rival, infinitely expansible, discrete, aspatial, and recombinant. The New Economy is one where the economics of digital goods importantly influence aggregate economic performance. This Article considers such influences not by hypothesizing ad hoc inefficiencies that the New Economy can purport to resolve, but instead by beginning from a Arrow-Debreu perspective and asking how digital goods affect outcomes. This approach sheds light on why property rights on digital goods differ from property rights in general, guaranteeing neither appropriate incentives nor social efficiency; provides further insight into why Open Source Software is a successful model of innovation and development in digital goods industries; and helps explain how geographical clustering matters.

Keywords: Aspatial, emergence, idea, information, innovation, intellectual asset, Internet, knowledge, Open Source, weightless economy

JEL Classification: D60, L12, O30, R12

Suggested Citation

Quah, Danny, Digital Goods and the New Economy (March 2003). Available at SSRN: https://ssrn.com/abstract=410604

Danny Quah (Contact Author)

National University of Singapore (NUS), Lee Kuan Yew School of Public Policy ( email )

Singapore
Singapore

HOME PAGE: http://lkyspp.nus.edu.sg/faculty/quah-danny/

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