CONCEPT
First-Copy Cost
The economic concept distinguishing information goods from physical goods — the cost of producing the initial version of an information good, which AI has collapsed toward the marginal cost of reproduction for a large class of software.
In classical information economics, the first-copy cost is the cost of producing the initial version of an information good — the years of development, accumulated expertise, iterative refinement through testing and user feedback. Every subsequent copy is nearly free, because information can be reproduced at negligible cost. The ratio between first-copy cost and marginal cost defines the economics of information goods and distinguishes them from physical goods. AI has compressed the first-copy cost of a large class of software toward the marginal cost, producing the commoditization dynamic that drove the SaaSpocalypse.
In The You On AI Field Guide
The first-copy cost concept organizes the analysis of information markets in Information Rules. Shapiro and Varian wrote: The cost of producing the first copy of an information good may be substantial, but the cost of producing (or reproducing) additional copies is negligible. This cost structure leads to economies of scale: the more you produce, the lower your average