Lectures: 2 sessions / week, 1.5 hours / session
This course uses theoretical models and studies of "old economy" industries to help understand the growth and future of electronic commerce. We will begin with a discussion of relevant topics from industrial organization including monopoly pricing, price discrimination, product differentiation, barriers to entry, network externalities, search and first-mover advantages. The largest part of the course will be a discussion of a number of e-industries. In this section we'll discuss extensions and applications of the ideas from the first part of the course, draw analogies to previous technological revolutions and read current case studies. Finally, we'll discuss two additional topics: bubbles in asset markets and the macroeconomic effects of the Internet.
This is an advanced undergraduate course. It requires that students be comfortable with mathematical modeling, microeconomics, econometric analysis, and basic game theory. Students are required to have either taken 14.03 and 18.06; or to have taken 14.12 and 6.840. Familiarity with statistics at the level of 14.30 will be useful at several points in the course. Econometrics will also come up occasionally. The material covered in the first month of the course has substantial overlap with material covered in 14.20.
There is no good textbook to use for studying e-commerce. Coming to lectures will be very important. Students who want a structured textbook presentation or who want to skip lectures should take another course. Most of the readings for the course are academic and popular articles. Some of these can be found on the Internet and others will be on reserve in the library. The syllabus also includes required web surfing that should be done in advance of many lectures. I have listed two texts as recommended, but none will be used heavily. The most highly recommended is Industrial Organization: Contemporary Theory and Practice by Pepall, Richards and Norman (South-Western College, 1999) [PRN]. This book will be useful as a reference for the models I'll be covering in the first month. Another book that some students may want to buy is Information Rules by Shapiro and Varian (Harvard Business School, 1999) [SV]. It has interesting non-technical discussions of network externalities and some other relevant topics. An expensive MBA text that I won't use much, but which provides background information relevant to some lectures is Principles of Internet Marketing by Hanson (South-Western College, 2000) [H]. Two recent e-commerce textbooks are Digital Dealing by Robert Hall (W.W. Norton, 2001) and The Internet Economy by Soon-Yong Choi and Andrew Whinston (SmartEcon, 2000). Neither has much overlap with most of my lectures, but they do provide additional reading for interested students.
The course grade will be based on six problem sets (20%), a short paper (15%), a midterm exam (25%) and a three-hour final exam (40%). You are expected to complete the problem sets on your own. Regular attendance at the recitation is strongly recommended, as the TA will discuss problem sets, clarify lecture material, and provide other useful guidance. The midterm exam will be given two days after the lecture on Online Investing. The final exam will be during the exam period. The paper will be due on the day of lecture on Copyrights and Napster. There will be six problem sets posted during the term of the course.
Cheating or academic dishonesty in any form will not be tolerated and will result in swift punitive action. This includes but is not restricted to copying information from other students' exams, communicating with other students during exams, failing to follow the rules of the exams regarding notes, calculators, etc., altering an exam for the purpose of a regrade, and producing fraudulent written excuses. Any student found to have cheated or behaved unethically or dishonestly will be given a grade of F on the exam involved and referred to the appropriate disciplinary committees within MIT for further action.
MIT's academic honesty policy can be found at the MIT Policies & Procedures site.