Mr Anderson believes that this allows the vision of the French economist Joseph Bertrand to be fulfilled. As companies compete vigorously, prices fall to just above the marginal cost of production. Since the marginal cost of making a piece of software is zero, and the cost of digital distribution is zero, prices ought to fall to free.

His vision has two flaws. First, as Hal Varian, Google’s chief economist, has pointed out, network effects unleashed by digital technology tend not to spawn free competition among equals but a “winner takes all” effect in which a single company emerges with all the spoils. In the software era, that company was Microsoft; in the internet era, it is Google.

The second flaw is that, even if the cost of digital distribution is lower than that of physical distribution, the marginal cost of production is not cut to zero. Companies have many costs, from marketing to employing people to make things. Offering things free on the internet is loss-leading just as surely as handing Jell-O recipe books to American housewives was in 1904.

FT: John Gapper

AVC: Fred Wilson

New Yorker: Malcolm Gladwell

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