Classroom Companion: Business

6.8 
 Conclusions
The most important characteristics of digital goods and services are summarized 
as follows:
5
The marginal cost of production and distribution of digital goods and services 
is zero.
$
$
$
$
Bundled service
Non-bundled services
. Fig. 6.6 Example of a bundle of the services Netflix, Spotify, and network access. (Authors’ own 
figure)
 
Chapter 6 · Digital Goods and Services

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5
Digital goods and services are non-rival; that is, the availability is not reduced 
by consumption and usage.
5
Digital goods and services may be excludable or non-excludable depending on 
commercial conditions of usage.
5
Several, but not all, digital goods and services are commodities; that is, they can 
only be distinguished by price. In some market segments, the price for the 
product is zero, and price cannot be used as differentiating factor.
5
It is easy to bundle digital goods and services in flexible packets. If the provider 
owns all components of the bundle and all components are digital goods, then 
the cost of bundling is zero. In this case, the customers may create their own 
bundles, for example, playing lists for music and collection of television chan-
nels.
 
>
Exercises
1. Digital Services
Which of the following are digital goods or services?
1. The New York Times web page
2. Internet access over a 4G mobile network
3. A compact disc (CD)
4. HBO subscription
5. An Apple iPhone
2. Computer Game Development
A computer game costs $100 million to develop (fixed costs). The game is 
sold to consumers of $50 per copy. Assume that the marginal cost is zero. 
How many copies must be sold to cover the fixed costs? How many copies 
must be sold to cover the fixed costs if the marginal cost of each copy is $10? 
Under what condition is the marginal cost zero? Under what condition is 
MC > 0?
3. Digital Commodities
Determine if any of the following digital goods have been commoditized:
1. Social media services
2. E-mail clients
3. Web browsers
4. Cloud storage
5. Wi-Fi Internet access
Why have these digital goods been commoditized? If they have not been 
commoditized, why not?
4. Bitcoin Transaction Costs
How does Bitcoin influence transaction costs in the digital economy? 
Which stakeholders are affected by Bitcoin’s potential impact on transaction 
costs?
5. Internet Explorer
In 2002, Internet Explorer had over 90% of the web browser market. Who 
were Internet Explorer’s main competitors at that time? Explain how Internet 
Explorer got so large.