Software Provision and the Impact of Market Integration

Both deeper market integration and advances in digital technology have driven particularly large decreases in the costs of intermarket software provision. In this note, we first explain the mechanism of how trade costs in uence the software provision decisions of software firms. Then, we investigate the transformation of production/trade patterns given gradually decreasing trade costs for software products. It is shown that, if two incompatible types of hardware exist, deeper market integration may reduce the variety of hardware technologies