Chapter 6 - Digital Goods and Services Flashcards
What is a digital good?
A digital good is a networked zero-marginal-cost virtual object having value for some users.
What are the differences between PaaS, SaaS, and IaaS in terms of
1. Data
2. Applications
3. Operative system
4. Infrastructure
See page 75
Which are the stakeholders in an e-banking service providing process?
- Bank
- Mobile operator (for SMS with OTPs)
- Authentication provider
- ISP
How is the cost structure of a business operating in digital goods providing?
Marginal costs: –>0
Fixed costs: very high
Which is the formula for average costs (AC) in digital goods?
AC= F/n +MC –> AC= F/n
What is rivalry and excludability? How can digital goods be classified according to these two variables?
Rivalry: the consumption of the good prevents others from using it / reduces the available quantity.
Excludability: the access to the good can be regulated by authorities or providers.
Digital goods are non-rival by nature and can be excludable or non-excludable.
What is ARPU and what is its role in digital economy? How does it affect supply and demand curves?
It is Average Revenue Per User and in digital economy is equal to 0 (for non-excludable goods). Since also MC=0, companies within digital economy do not pay anything for additional users as they do not earn anything from that additional user.
Consequence: try to get revenues from other sources (network effects and multi-sided platforms)
What is meant by commoditization?
It is the process by which users become unable to distinguish offerings provided by different companies. The only distinguishing factor remains the price.
What are standards?
They force digital goods providers to commoditize their offering (making it undistinguishable from the competitors’ ones)
Example of a commoditized digital product
Could be the word editing software packages. Since the 1990s, Microsoft Word set the standard within this digital good field.
What are transaction costs and their three sub-categories? Example?
Transaction costs are costs associated to the purchasing and selling of goods and services.
Three categories are:
1. Searching costs
2. Bargaining costs
3. Policing and enforcement costs
Example: Ebay (1) costs to look up the product, (2) costs to bargain (3) costs to enforce due payments or quality of the goods sold.
What is bundling? Why is it particularly efficient in the digital economy?
Bundling happens when several products are combined and offered for sale in a single package. The bundle price is usually lower than the sum of its single components sold singularly.
It is particularly effective in the digital economy due to the MC=0 characteristic. An ARPU>0 helps the company to increase revenues and consequently profits. Moreover, the bundle adds value to the offering and increases buyer’s inclination to purchase.
