Global Software Users’ Co-op

Summary

Software users can get a better deal on some software by organizing into a large buying group. Creating a consumer cooperative is a promising way to do this. Large group purchases can help solve problems in the software business, including monopoly power, the costs of intellectual “property” law, and deadweight loss from prices exceeding marginal costs. For such a co-op to work efficiently, it needs an institutional framework that will minimize agency costs and enhance competition among software suppliers.

A piece of software, once created, can be copied and used by any number of people with no additional production cost. For that reason, the economics of software resemble the economics of public goods provided by governments, which benefit an entire community at once. So designing a framework for the software business is similar to designing a framework for supplying public goods. Ideas for either of these may help in designing the other.

This paper outlines the institutional structure, voting system and rules for such a co-op. Software providers would compete to sell bundles of software (broadly defined to include any information goods). Co-op members would get usage rights for all bundles provided, and would vote to allocate funds among (but not within) the bundles. Allocation of funds among components within a bundle would be decided by contracts between bundlers and developers.