An essay discussing economic theories for downloadable products and Web 2.0 companies.

How do traditional economic theories of cost, pricing and output that are applicable to traditional goods apply to the market for downloadable products?

Over the last few months I’ve been increasingly hearing the argument that Web 2.0 companies have a marginal cost of zero. This argument is correct to the extent that after the development of the application the marginal cost decreases to zero, but of course for the first unit never is.

It’s a theory I explored further in 2006/2007 for the IB Extended Essay. This was a paper I was required to write in partial fulfillment of the requirements of my degree. Now I have obtained my degree I would like to ask your feedback on my applied economic theories. I have embedded the document below and by clicking the button in the right hand corner of the iPaper it will increase the size to fullscreen.  Page 7 and 8 of the essay are of less importance to anyone familiar with economic theory as they are short outlines of the traditional theories. It is from page 9 onwards I discuss and propose new theories amongst which I dis-confirm the theory of demand and supply.

For my paper I was limited to 4000 words and was therefore made to keep my arguments brief. I would however love to discuss them in more depth in the comments. If you know someone who might be interested in discussing these theories please ask them the question,“Have you talked to Eiso Kant yet?”

If you would like a downloadable or editable copy, please leave the request in the comments.

July 10, 2008 | Filed Under Mini Essays 

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