MGCR 331 Lecture Notes - Lecture 6: Ebay, Complementary Good, Switching Barriers

• School: McGill University
• Department: Management Core
• Course: MGCR 331
• Professor: Richard Donovan

Document Summary

Is lecture 6- digital goods & network effects. Properties of digital goods: can be easily replicated, can be easily distributed, digital goods have an unusual cost structure. High cost of producing the first copy (high fixed costs) Low or zero costs of producing the second, third, (low variable cost) Creation costs are sunk" (and not easily recoverable) Essentially, digital goods are costly to produce, but cheap to reproduce. Britannica: 200 year, for a printed set. 1992: microsoft purchases funk & wagnalls to make encarta. Britannica response: online subscription at per year, sales dropped 50% between 1990 and 1996, online subscription at , cd for , after 1996 -, now: . *sunk costs by first mover, competitors drive price to marginal costs of making additional copy, must uncommoditize product (dominance; differentiation) Microsoft shut down encarta website on october 31, 2009. The category of traditional encyclopaedias and reference material has changed .