The Economics of Information: Strategy, Structure and Pricing

Readings

Textbooks and Readings

Strongly Suggested

[S&V]= Shapiro, Carl, and Hal Varian. Information Rules: A Strategic to the Network Economy. Cambridge, MA: Harvard Business School Press, 1998. ISBN: 9780875848631.

[B&S]= Brynjolfsson, Erik, and Adam Saunders. Wired for Innovation: How Information Technology is Reshaping the Economy. Cambridge, MA: MIT Press, 2009. ISBN: 9780262013666.

Optional

Saloner, Garth, and A. Michael Spence. Creating and Capturing Value: Perspectives and Cases on Electronic Commerce. New York, NY: John Wiley & Sons, 2001. ISBN: 9780471410157.

Brynjolfsson, Erik, and Brian Kahin, eds. Understanding the Digital Economy. Cambridge, MA: MIT Press, 2000. ISBN: 9780262024747.

Liebowitz, Stan. Re-Thinking the Network Economy: The True Forces that Drive the Digital Marketplace. New York, NY: American Management Association, 2002. ISBN: 9780814406496.

Varian, Hal, Joe Farrell, and Carl Shapiro. The Economics of Information Technology: An Introduction. Cambridge, UK: Cambridge University Press, 2005. ISBN: 9780521605212.

Sloan Management Review

SES #	TOPICS	READINGS
1	The economics of information	Required McAfee, Andrew, and Erik Brynjolfsson. “Investing in the IT That Makes a Competitive Difference.” Harvard Business Review Magazine, July-August 2008. ———. “Dog Eat Dog: Industries That Buy a Lot of Technology Are Becoming as Cutthroat as Those That Produce Technology.” Wall Street Journal (April 28, 2007). Optional “Technology, Innovation and Productivity in the Information Age.” Chapter 1 in [B&S]. “The Information Economy.” Chapter 1 in [S&V]. Stiglitz, Joseph E. “The Contributions of the Economics of Information to Twentieth Century Economics.” Quarterly Journal of Economics 115, no. 4 (2000): 1441-78.
2	Sermo	Required Eisenmann, Thomas, and Lars P. C. Nielsen. “Sermo, Inc.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 809142-PDF-ENG, April 10, 2009. “Networks and Positive Feedback.” Chapter 7 in [S&V], pp. 175-225. Optional Economides, Nicholas. “The Economics of Networks.” International Journal of Industrial Organization 16, no. 4 (1996): 673-99. Leibowitz, Steven, and Steve Margolis. “Network Externalities (Effects).” The New Palgraves Dictionary of Economics and the Law. New York, NY: Macmillan, 1998. ISBN: 9781561592159.
3	Differential pricing, signaling and screening	Required Varian, Hal. “Buying, Sharing, and Renting Information Goods.” The Journal of Industrial Economics 48, no. 4 (2000): 473-88. Schoder, Detlef, and Alex Talalayevsky. “The Price Isn’t Right.” Wall Street Journal (August 23, 2010). Miller, Evan. “Golden Footballs and the Economics of Groupon.” Hamermesh, Daniel. “What Do Books and Roses Say About Discounting?” New York Times, February 23, 2009. Wertheimer, Linda. “New Pricing Plan Soon to Be for Online Music.” National Public Radio, July 27, 2009. Optional “Pricing Information.” Chapter 2 in [S&V]. “Versioning Information.” Chapter 3 in [S&V]. Tirole, Jean. The Theory of Industrial Organization. Cambridge, MA: MIT Press, 1988, chapter 3, pp. 133-152. ISBN: 9780262200714. Shiller, Ben, and Joel Waldfogel. “Music for a Song: An Empirical Look at Uniform Song Pricing and its Alternatives.” Working Paper. Philadelphia, PA: Wharton School, University of Pennsylvania, June 17, 2008.
4	Bundling and aggregation	Required Brandenburger, Adam, and Krishna Vijay. “Bundling.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 9-191-177, April 10, 1995. Bakos, Yannis, and Erik Brynjolfsson. “Aggregation and Disaggregation of Information Goods: Implications for Bundling, Site Licensing and Micropayment Systems.” In Internet Publishing and Beyond: The Economics of Digital Information and Intellectual Property. Edited by Hal Varian, and Brian Kahin. Cambridge, MA: MIT Press, 2000. ISBN: 9780262611596. Albanesius, Chloe. “If Sirius-XM Can Offer A La Carte Programs, Why Can’t Cable?” PC Magazine, July 30, 2008. Optional Bakos, Yannis, and Erik Brynjolfsson. “Bundling and Competition on the Internet.” Marketing Science 19, no. 1 (2000): 63-82. ———. “Bundling Information Goods: Pricing, Profits and Efficiency.” Management Science 45, no. 12 (1999): 1613-1630.
5	Search and competition	Required Smith, Bailey, and Erik Brynjolfsson. “Understanding Digital Markets.” In Understanding the Digital Economy. Edited by Erik Brynjolfsson, and Brian Kahin. Cambridge, MA: MIT Press, 2000. ISBN: 9780262024747. Optional Bakos, Yannis. “Reducing Buyer Search Costs: Implications for Electronic Marketplaces.” Management Science 43, no. 12 (2000): 1676-1692. Brynjolfsson, Erik, and Michael D. Smith. “Frictionless Commerce? A Comparison of Internet and Conventional Retailers.” Management Science 46, no. 4 (2000): 563-585.
6	Two-sided networks and platform competition	Required Edelman, Benjamin, and Ian I. Larkin. “eBay Partner Network (A).” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 910008, August 11, 2010. Optional Arthur, W. Brian. “Increasing Returns and the Two Worlds of Business.” Harvard Business Review Magazine, July-August 1996.
7	Pricing at zero	Required Anderson, Chris. “Free! Why $0.00 Is the Future of Business.” Wired Magazine, February 25, 2008. Parker, Geoffrey, and Marshall W. Van Alstyne. “Two-Sided Network Effects: A Theory of Information Product Design.” Management Science 51, no. 10 (2005): 1494-1504. Gladwell, Malcolm. “Priced to Sell: Is Free the Future?” The New Yorker, July 6, 2009. Pulley, Brett, and Andy Fixmer. “Diller Calls Free Web Content a ‘Myth, Joins Refrain.” Bloomberg News, July 24, 2009. Rich, Motoko. “With Kindle, the Best Sellers Don’t Need to Sell.” New York Times, January 22, 2010. Optional Eisenmann, Thomas, Geoffrey Parker, and Marshall W. Van Alstyne. “Strategies for Two-Sided Markets.” Harvard Business Review Magazine, October 2006. Chapters 5 and 6 in [S&V]. Chapters 2 and 7 in [B&S].
8	Amazon	Required Siegel, Micah, and Fred Gibbons. “Amazon Enters the Cloud Computing Business.” Stanford University School of Engineering Case. Palo Alto, CA: Stanford University. Case: 2008-353-1, May 20, 2008. Optional Stone, Brad. “Can Amazon be the Wal-Mart of the Web?” New York Times, September 20, 2009. Wilke, Jeff. “Geeking Out at Amazon.” Technology Review, November-December 2007.
9	Targeted advertising: Google	Required Edelman, Benjamin, and Thomas Eisenmann. “Google Inc.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 910036-PDFENG, January 28, 2010. Levy, Steven. “Secret of Googlenomics: Data-Fueled Recipe Brews Profitability.” Wired Magazine, May 22, 2009. Optional Varian, Hal. “The Economics of Internet Search.” Anglo Costa lecture. Rome, Italy, February 2007. (PDF)
10	Measurement, analytics, and experimentation	Re-read: Levy, Steven. “Secret of Googlenomics.” Wired Magazine, May 22, 2009.
11	The long tail	Required Anderson, Chris. “The Long Tail.” Wired Magazine, October 2004. Brynjolfsson, Erik, Yu (Jeffrey) Hu, and Michael D. Smith. “Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers,” Management Science 49, no. 11 (2003): 1580-1596. Optional Brynjolfsson, Erik, Yu (Jeffrey) Hu, and Mohammad Rahman. “Battle of the Retail Channels: How Product Selection and Geography Drive Cross-channel Competition.” Management Science 55, no. 11 (2009): 1755-1765. Varian, Hal R. “Reading Between the Lines of Used Book Sales.” New York Times, July 28, 2005. Garrity, Brian. “DMG Bets on ‘Long Tail’.” Billboard, February 18, 2006.
12	Deep QA and knowledge work	Required Thompson, Clive. “What is IBM’s Watson?” New York Times Magazine, June 16, 2010. Hayek, F. A. “The Use of Knowledge in Society.” American Economic Review 35, no. 4 (1945): 519-530.
13	Midterm exam	Review readings and class notes.
14	Wikipedia	Required Greenstein, Shane, and Michelle Devereux. “Wikipedia in the Spotlight.” Kellogg School of Management Case. Chicago, IL: Kellogg School, Northwestern University. Case: 5-306-507, 2006. Optional Raymond, Eric S. “The Cathedral and the Bazaar.” In The Cathedral and the Bazaar. Sebastopol, CA: O’Reilly Media, Inc., 2001. ISBN: 9780596001087.
15	Enterprise 2.0	Required McAfee, Andrew. “The U.S. Intelligence Community (A).” The MIT Center for Digital Business Case. Cambridge, MA: MIT. Case Study 101, October 2009. Optional McAfee, Andrew. “Enterprise 2.0.” Sloan Management Review 47, no. 3 (2006): 21-28. Brynjolfsson, Erik, and Andrew McAfee. “Beyond Enterprise 2.0.” Sloan Management Review 48, no. 3 (2007): 50-55.
16	Open source and innovation	Required Raymond, Eric S. “The Magic Cauldron.” In The Cathedral and the Bazaar. Sebastopol, CA: O’Reilly Media, Inc., 2001. ISBN: 9780596001087. Davis, Randall. “The Digital Dilemma.” Communications of the ACM 44, no. 2 (2001): 77-83. Optional Chapter 4 in [S&V]. Chapter 6 in [B&S]. Stallman, Richard. “Why Software Should Not Have Owners.” In Free Software, Free Society: Selected Essays of Richard M. Stallman. Boston, MA: Free Software Foundation, 2002. ISBN: 9781441436207. U. S. Copyright Office. Digital Millennium Copyright Act summary, December 1998. (PDF) Besen, Stanley M., and Leo J. Raskind. “An Introduction to the Law and Economics of Intellectual Property.” Journal of Economic Perspectives 5, no. 1 (1991): 3-27. Lessig, Laurence. Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity. New York, NY: Penguin, 2004. ISBN: 9781594200069.
17	Experimentation, replication	Required Hopkins, Michael S. “The 4 Ways IT is Driving Innovation: An Interview with Erik Brynjolfsson.” Sloan Management Review 51, no. 3 (2010): 51-56. Kohavi, Ron, Roger Longbotham, and Toby Walker. “Online Experiments: Practical Lessons.” IEEE Computer 43, no. 9 (2010): 82-85. Brynjolfsson, Erik, and Michael Schrage. “The New, Faster Face of Innovation: Thanks to Technology, Change Has Never Been So Easy- or So Cheap.” Wall Street Journal (August 17, 2009).
18	Digital advantage	Required Brynjolfsson, Erik, and Lorin M. Hitt. “Beyond Computation: IT, Organizational Transformation and Business Performance.” Journal of Economic Perspectives 14, no. 4 (2000): 23-48. Optional Chapters 3 and 4 in [B&S]. Brynjolfsson, Erik, Andrew McAfee, Michael Sorell, and Feng Zhu. “Scale Without Mass: Business Process Replication and Industry Dynamics.” Harvard Business School Technology and Operations Mgt. Unit Research Paper No. 07-016, September 30, 2008.