  As an alternative to rigid DRM measures, ways of marketing virtual goods
through multi-level or networked marketing have raised some interest. This
report is a first approach to multi-level markets for virtual goods from the
viewpoint of theoretical economy. A generic, kinematic model for the monetary
flow in multi-level markets, which quantitatively describes the incentives that
buyers receive through resales revenues, is devised. Building on it, the
competition of goods is examined in a dynamical, utility-theoretic model
enabling, in particular, a treatment of the free-rider problem. The most
important implications for the design of multi-level market mechanisms for
virtual goods, or multi-level incentive management systems, are outlined.
