ABSTRACT
In many existing models of pricing of digital content in the literature, equilibrium is rarely defined or is rarely defined accurately even though it is one of the main elements of both conceptual and analytic solutions. Govindan and Wilson (2006) analyzed the conditions sufficient for equilibrium. Kohlberg and Mertens (1986) stated the required properties of a good normal form solution concept and the three types of stability (KM stability, full stability, and hyperstability) that satisfy some, but not all, of those properties. Goodman and Porter (1988) addressed competitive regulatory equilibrium in general. Although Virag (2011) addresses concepts of competitive nonregulatory equilibrium, most of the theorems in Virag (2011) are wrong and equations 2,5,4,8,9, and 13 in Virag (2011) are also wrong because (1) sellers have brand equity and buyers have individual preferences that evolve (symmetry of buyers’ preferences across sellers is rare/uncommon and an unreasonable assumption); (2) zero-utility equilibrium is rare but possible and the article does not state conditions under which it occurs; (3) a seller’s market power is not always inversely proportional to the market size, even in a market that is not an oligopoly/duopoly/monopoly (because of pricing, service/delivery terms, promotions/discounts, complimentary goods, regulation, product quality, lack of substitutes, etc.); (4) the anonymity of buyers varies or can vary across sellers; and (5) in the equations in which limits are mentioned, the formulas do not behave as stated when the variables tend to positive or negative infinity. These concepts/definitions of equilibrium differ from and can be more efficient than Nash Equilibrium in many dimensions and circumstances.
