Measuring the value of free digital goods - John Lourenze Poquiz

Unlike the total cost approach, the aggregate we generate is a function of the number of users of the good, thus, by construction, it guarantees that the value derived by an additional user is reflected in the estimates. [...] They considered the intercept for the demand curve they fitted as Facebook’s reservation price ($2,152) and proceeded to the measurement of the contri- bution of the social media site to the US economy or welfare. [...] As such, the price of premium versions would reflect the willingness to pay for the utility derived from the consumption of the services. [...] These are the number of participants in the case of videoconferencing and the mail storage in the case of email. [...] First, we com- pare our shadow price estimates to the price estimates to the price of the estimated price of each characteristic, with the assumption that the majority of the value of each service would come from its core feature of the service, which can be found in the free version.