Information good
Information goods are commodities that provide value to consumers as a result of the information it contains and refers to any good or service that can be digitalized. Examples of information goods includes books, journals, computer software, music and videos. Information goods can be copied, shared, resold or rented. Information goods are durable and thus, will not be destroyed through consumption. As information goods have distinct characteristics as they are experience goods, have returns to scale and are non-rivalrous, the laws of supply and demand that depend on the scarcity of products do not frequently apply to information goods. As a result, the buying and selling of information goods differs from ordinary goods. Information goods are goods whose unit production costs (including distribution costs) are negligible compared to their amortized development costs. Well-informed companies have development costs that increase with product quality, but their unit cost is zero. Once an information commodity has been developed, other units can be produced and distributed at almost zero cost. For example, allow downloads over the Internet. Conversely, for industrial goods, the unit cost of production and distribution usually dominates. Firms with an industrial advantage do not incur any development costs, but unit costs increase as product quality improves. Common Trading Models There are two common trading methods in information goods trading. Leasing model and selling model. Providers of information goods and services are increasingly adopting leasing models. Leasing model: The user does not own it permanently but leases the information good or service from the provider and pays a fixed fee on a regular basis. For example, mobile music applications. Consumers pay monthly for listening rights to all songs on the platform. Selling model: After prepaid, consumers can use it unlimited times. For example, games from game companies. Consumers can play the game regardless of the time and number of times after purchasing a game disc or network license. Disadvantages of Information Goods Piracy is one of the most important issues facing information service providers today. A report from the U.S. Government Accountability Office states that counterfeiting and piracy have a wide-ranging impact on consumers, industries, governments and the economy. Generally, it depends on the type of infringement involved and other factors. These include lost sales, lost tax revenue, damaged brand value, and reduced incentives to innovate. For example, the software industry may be one of the hardest hit. In 2011, the piracy rate of US software products was about 20%. That alone cost the American software maker a whopping $9.5 million in lost revenue. In addition, social sharing of information goods involves buying and sharing a single good through a network of acquaintances such as friends or colleagues is also an important issue for suppliers of these goods. When customers buy an information good and send it to their friends or colleagues. The person who receives it does not need to buy it again. Although these actions do not involve piracy, it affects the sale of information goods. Bundling Strategy Although information