Software consists of digital bits that are downloaded onto the storage devices of a computer. Software is also a general name for audio and video disks that can be inserted into audio or video players connected to stereo systems or television sets. Software consists of software packages, music, or movie titles that are designed to perform different tasks (different themes) commanded by the user(s) of the computer (or player).

Computer software “issues” commands to the hardware devices of the computer instructing these devices how to perform specific tasks instructed by the user. Audio and video software contain all the information for the hardware to be able to play certain music or to show certain movies. All types of software can be modified, replaced, or upgraded. Software packages are generally produced by a large number of software firms that generally are independent of the hardware producers. For this reason software packages are regarded as supporting services for the hardware. Thus, a larger variety of software supporting a certain hardware increases the value of this specific hardware machine. Therefore, the approach taken in this chapter is sometimes referred to in the literature as the supporting services approach.

The novelty of the analysis presented in this chapter is that consumers are assumed to derive utility directly from the variety of supporting services supporting the specific hardware or the operating system they use.