The Economics of Information Technology: An Introduction (Raffaele Mattioli Lectures)

The Economics of Information Technology is a concise and accessible review of important economic factors affecting information technology industries. These industries are characterized by high fixed costs and low marginal costs of production, large switching costs for users, and strong network effects. Hal Varian outlines the basic economics of these industries while Joseph Farrell and Carl Shapiro describe the impact of these factors on competition policy. The volume is an ideal introduction for undergraduate and graduate students in economics, business strategy, law and related areas. Cover 1 Half-title 3 Title 5 Copyright 6 Contents 7 Figures 9 The Raffaele Mattioli Lectures 11 PART ONE 1 Competition and market power 13 1 Introduction 13 2 Technology and market structure 15 3 Intellectual property 16 4 The Internet boom 17 4.1 Financial speculation 21 4.2 Where are we now? 22 4.3 The "New Economy" 24 5 Differentiation of products and prices 24 5.1 First-degree price discrimination 25 5.2 Second-degree price discrimination 27 5.3 Third-degree price discrimination 29 5.4 Conditioning on purchase history 30 5.5 Search 30 5.6 Bundling 31 6 Switching costs and lock-in 33 6.1 Simple analytics of lock-in 34 6.2 Competition to acquire customers 34 6.3 Analytics of competition to acquire customers 36 6.4 Switching costs and price discrimination 36 7 Supply-side economies of scale 37 7.1 Competition and welfare 40 7.2 Competing for monopoly 41 7.2.1 THE CURRENCY OF COMPETITION 42 7.2.2 RULES OF THE GAME 43 8 Demand-side economies of scale 45 9 Standards 49 9.1 Standards wars 50 9.2 Standards negotiations 52 9.3 Standards leader 53 9.4 Cost advantages of standardization 54 10 Systems effects 54 11 Computer mediated transactions 57 12 Summary 58 PART 2 Intellectual property, competition, and information technology 61 13 Introduction 61 14 Patents, trade secrets, and copyrights 66 14.1 Copyrights 66 14.2 Patents 75 14.2.1 PATENT INSTITUTIONS 75 14.2.2 GROWING NUMBER OF PATENTS 76 14.2.3 DOSE THE PATENT SYSTEMS PROVIDE SUITABLE INCENTIVES TO INNOVATE? 77 14.2.4 LICENSING AND THE DIFFUSION OF INNOVATIONS 81 14.3 Trade secrets 83 15 Differentiation of products and prices 85 16 Switching costs and lock-in 89 17 Standards and patents 92 18 Do we need to reform the patent system? 94 19 Summary and conclusions 97 Bibliography 99 Index of names 109 Index of subjects 111 An Introduction For Undergraduate And Graduate Students In Economics, Business Strategy, Law And Related Areas, This Work Is A Concise And Accessible Review Of Some Of The Important Economic Factors Affecting Information Technology Industries. The Raffaele Mattioli Lectures -- Pt. I. Competition And Market Power -- 1. Introduction -- 2. Technology And Market Structure -- 3. Intellectual Property -- 4. The Internet Boom -- 5. Differentiation Of Products And Prices -- 6. Switching Costs And Lock-in -- 7. Supply-side Economies Of Scale -- 8. Demand-side Economies Of Scale -- 9. Standards -- 10. Systems Effects -- 11. Computer Mediated Transactions -- 12. Summary -- Pt. Ii. Intellectual Property, Competition, And Information Technology -- 13. Introduction -- 14. Patents, Trade Secrets, And Copyrights -- 15. Differentiation Of Products And Prices -- 16. Switching Costs And Lock-in -- 17. Standards And Patents. Hal R. Varian, Joseph Farrell, Carl Shapiro. Includes Bibliographical References (p. 87-96) And Indexes. The Economics of Information Technology is a concise and accessible review of some of the important economic factors affecting information technology industries. These industries are characterized by high fixed costs and low marginal costs of production, large switching costs for users, and strong network effects. These factors combine to produce some unique behavior. The book consists of two parts. In the first part, Professor Varian outlines the basic economics of these industries. In the second part, Professors Farrell and Shapiro describe the impact of these factors on competition policy. The clarity of the analysis and exposition makes this an ideal introduction for undergraduate and graduate students in economics, business strategy, law and related areas. During the 1990s there were three back-to-back events that stimulated investment in information technology: telecommunications deregulation in 1996, the "year K" problem in 1998-99, and the "dot com" boom in 1999-2000.