Home > Behavioural Economics > Consumers to Prosumers

Consumers to Prosumers

In the March edition of the University of Otago publication EcoNZ@Otago there was a good article on ‘Prosumers’.

In markets, firms produce goods and services and consumers buy them (see Figure 1). This is the underlying set-up embodied in many economic models. Most of the time, the buyer-seller dichotomy is an accurate representation of market activity. Since the early 1990s, however, another paradigm has emerged. The advent of the internet has allowed some industries to assign a stronger role in the production of goods and services to those
who purchase them (see Figure 2). Consumers are becoming prosumers and firms are benefiting (immensely) by consumer-led marketing and design.

A key feature of prosumers is that they are not paid for the work that they do. Every time you post a review about a product online, for example, you are either doing marketing for the firm (in the case of good reviews) or providing them with information about their product’s shortcomings which they can use to improve their wares (i.e. quality control, in the case of bad reviews). The firm pays you nothing for this. In some cases, prosumers work for the firm without even knowing it. Some websites monitor the buying activities of other users so they can suggest products to you based on the goods in your shopping cart. By simply buying online, you help the firm cross-sell products to others in the future.

But there is an even stronger role in the production process for prosumers! Occasionally, prosumers will take it upon themselves to build products from scratch and share them with other prosumers (see Figure 3). One example of this is the production of open-source software. In the 1980s, such software was made available under General Public Licensing (also known as copylefting), a licensing procedure developed by the Free Software Foundation. Anyone is allowed to use and modify copylefted software under the conditions that: (1) they do not attempt to impose licensing restrictions on others, and (2) all enhancements to the code are licensed on the same terms.This means that any programmer who makes alterations to the code can claim ‘bragging rights’ for their work, but they cannot charge others to use it.

Prosumers

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  1. July 15, 2013 at 7:11 pm

    Hey Mark! Nice to see you’re still blogging. You’ve now got so much content you might want to consider a static home page with menu of topics. Doing that doubled my readership! Check out ipad4schools.org to see what I mean. I’m assuming King’s is as happy s ever.

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