Abstract of

'Incentive Systems in Multi-Level Markets for Virtual Goods'

As an alternative to rigid DRM measures, ways of marketing virtual goods through multi-level or networked marketing have raised some interest. This report is a first approach to multi-level markets for virtual goods from the viewpoint of theoretical economy. A generic, kinematic model for the monetary flow in multi-level markets, which quantitatively describes the incentives that buyers receive through resales revenues, is devised. Building on it, the competition of goods is examined in a dynamical, utilitytheoretic model enabling, in particular, a treatment of the free-rider problem. The most important implications for the design of multi-level market mechanisms for virtual goods, or multi-level incentive management systems, are outlined.

Subject Classes

MSC: 91B60, 90B60, 46N10

JEL: C51, C67, D4

ACM: K4.4

Keywords and Phrases

Multi-Level Market; Incentive; Free-Rider Problem; Competition.