The Economic Analysis Of Computer Software Market

It is no doubt that the concept of network effects/network externalities is critical for the software industry. In this dissertation, I provide the new utility function based on the number of users and deduce the individual/market desire function of software, which is also called the individual/market users function of price. They are definitely distinguished with the individual/market price function of demand. The crucial phenomena of software product are high fixed cost, low varied cost and the inclined-to-zero marginal cost. Furthermore, in the market there does not present a certain price function of supply, only exist an area of price-decision. These specialties consequently result in the instable equilibrium of software market and the emergence of monopoly power. Unfortunately, the roar progress of technology makes the power faint and the monopoly firm does not dominate the market for a long time .In the last chapter, I also discuss the social welfare problem of software industry and draw some basic conclusion.