Business
Information Economics
Information economics is the study of how information is created, distributed, and utilized in economic systems. It focuses on the impact of information asymmetry, where one party has more or better information than the other, on decision-making and market outcomes. In business, understanding information economics helps in making informed decisions about pricing, product development, and strategic planning.
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7 Key excerpts on "Information Economics"
eBook - PDF- Enrico Coiera(Author)
- 2015(Publication Date)
- CRC Press(Publisher)
C H A P T E R 1 4 Information Economics The diffusion, acceptance and ultimate success of any information technology are at least as dependent upon the social system within which it is placed as on the technology itself. Yet we still lack clear models that explain why some information services are so successful and widely adopted, whereas others struggle even though they seem to be good ideas. Technology acceptance models provide some insights into the factors that shape the deci-sion to adopt or not adopt a technology (see Chapter 11). Economics is another discipline that can offer us insights into the dynamics of information creation and use. Economics is able to factor in both the specific technical advantages of one product or service over another, but it also captures the preferences and utilities of individuals who chose to use them. In the specialist field known as Information Economics, we find theoretical and practical models for creating, diffusing and using information products (Brousseau and Curien, 2007). Information Economics focusses on understanding how and why networks of individuals assemble and interact to exchange information and the emergent properties of those interac-tions. As such, it provides informatics a core set of theoretical results with wide application. In this chapter, the basic properties of information as an economic good are introduced. Beginning with information production, the economic properties of information are of sub-stantial importance for those creating and publishing information, independently of whether their intent is commercial. Next, the cost of accessing information, whether by clinicians or consumers, shapes the willingness of these clinicians and consumers to use an information service.
eBook - PDF- Rhona C. Free(Author)
- 2010(Publication Date)
- SAGE Publications, Inc(Publisher)
71 ECONOMICS OF INFORMATION VIKTAR FEDASEYEU Boston College A s Francis Bacon once noted, knowledge is power. The need to acquire and process information is a tremendously important part of human interactions. Economic interactions are no exception. Investors buying stocks or other securities need to analyze the quality and reliability of information supplied to them. Employers must evaluate qualifications of job applicants prior to starting a working relationship with them. Insurance companies must set premiums based on the perceived risks of the insured. Examples of this sort abound in any field of economics. The purpose of this chapter is to show that the structure of the information environment can have significant con-sequences for how the markets and the whole economy operate. Standard theories of competitive equilibrium usu-ally avoid these issues by assuming that all agents have costless access to the same information. The recognition that this is a very limiting assumption is what has fueled research in Information Economics. Information, unlike other goods that interest econo-mists, has several unique characteristics: • Information is a public good: Learning does not prevent others from learning. • Information cannot be unlearned; that is, the decision to acquire information is irreversible once it has been acquired. • Information is asymmetric: Different people know different things. It is conceptually easy to understand the public-good nature of information. The other two characteristics require further clarification. The fact that information cannot be unlearned complicates the process of information produc-tion. Unlike other goods, information cannot be sampled or returned for a refund: Once the decision has been made to learn something, it is virtually impossible to reverse it after obtaining information. It is of course possible to for-get information. Forgetting, however, will not reimburse one for the efforts expended to obtain information.
- Erwin Grochla, Norbert Szyperski(Authors)
- 2018(Publication Date)
- De Gruyter(Publisher)
Hence, these efforts deserve our atten-tion and if necessary a constructive critique. 2.1 Contributions by Butterworth, Demski, Feltham and others Information Economics regards information as a resource having a value, a cost and related features. 5 It also is concerned with the improvement of a priori pro-babilities by means of additional information, converting the former into a poste-riori probabilities (Bayesian approach). Thus the jump from decision theory to Information Economics is a small one. Indeed, the question how much is this (additional) information worth? already looms in many decision theoretical is-sues, even without further elaboration. The information model resembles its pa-rent in many features, and the major differences lie in the probability concept as-signed, as well as in the expansion necessary for transgressing from the value of an information to the value of an information system. This transfer becomes obvious when considering that Information Economics is not only interested in 5 Cf. Henry Theil: Economics and Information Theory, Chicago 1967. Information Economics and the notion of Management Information System 345 the value of a specific information signal, but in the value of an entire informa-tion system. By stripping the decision model and the information model to their very bones we can easily recognize those similarities and differences (see Table 1). Primitive Decision Model Primitive Information Model 6 m n E a = u ae ' Pe E ai = 2 u ae ' P e i e=l e=l V J J = max E a Vj = max E a i u a e utility of action a if event e occurs p e prior probability that event e will occur E a expected value of action a VJJ value of best decision D For both models: a = = 1 . . . . , m e = • . , n i = = 1,.. • » 1 max = maximize over the range a of all actions a = 1 , .
eBook - ePub- William J. Martin(Author)
- 2017(Publication Date)
- Routledge(Publisher)
20 The economics of information networks is now emerging within a broader economic theory of information production and use, including such components as:– the economics of the generation of technological innovations;– the economics of diffusion of technological innovations;– the economics of market competition;– regional economics;– the theory of industrial organization;– the theory of the firm.20Something of the contribution of these developments can be gauged in terms of their impact upon firms, regions and markets. One aspect is the tendency for externalities or forms of direct interdependence among the members of an economic system that do not operate through the market mechanism or that are not fully mediated by prices. Externalities are thought to arise when growth investments and technological change in an industry cause capacity expansion and decline of product prices and factor costs. These externalities affect the behaviour of firms supplying those productive factors and using those products. Often clusters of industries emerge around the externalities spilling from core technologies and make it possible to increase the levels of productivity and competitiveness of all the firms which interact in the flows of exchanges of goods, services and information. Moreover, the increased availability of skilled manpower and the opportunities for training and learning benefit the other firms within the economic system.20Another outcome can be the emergence of network firms to take advantage of externalities and increase the level of appropriability of the benefits of technological innovation and reduce the public goods character of knowledge. Network firms are characterized by interlocking directorates, long term contracts, joint-ventures, cross-licensing, technology clubs and swapping of minority stakes. They can also serve as structures which enable organizations to learn from the selective integration of localized learning opportunities on the network. Co-operation among such firms is selective and revolves around certain well-defined tasks and objectives, with safeguards built into the system to prevent abuse.20
eBook - PDF- Edward A. Comor(Author)
- 2017(Publication Date)
- University of Toronto Press(Publisher)
The Place of Information in Economics 23 microeconomic approach, often called ‘Information Economics.’ While differences in treatment afforded information/communication among these approaches are readily evident, of far greater importance are the similarities. In particular, they are of one accord in treating, or in endeavouring to treat, information as commodity. The main thrust of the argument of the ensuing section is as follows: mainstream economics, premised as it is on the ubiquity of commod-ity exchange, needs to treat information as a commodity in order to account for information within the mainstream or orthodox paradigm. Information, however, does not fulfil the definitional and conceptual requirements of commodities, thereby placing the discipline in a cri-sis concerning its own internal validity. Moreover, insisting that infor-mation is a commodity obscures not only many essential properties of information, but as well consequences of informational exchange, cre-ating thereby also a crisis of external validity. The penultimate section reverses the Becker/Stigler/Posner propos-al and explores possibilities for ‘economic colonization,’ contending that economics’ crises can be resolved only if the discipline is viewed more modestly, as but one way to investigate communicatory interac-tions. The concluding section touches on political economy aspects of the ‘information commodity.’ Despite internal inconsistencies and incongruity with external phe-nomena caused by conceiving information as commodity, mainstream economics retains this analytical mode and itself remains remarkably influential. To understand the source of this unwarranted influence requires acknowledging the broader political economy that shapes mainstream analysis. There is wealth, status, and other emoluments to be had from ‘proper’ economics, and mainstream economics confers advantages to some.
eBook - PDFInternet and Digital Economics
Principles, Methods and Applications
- Eric Brousseau, Nicolas Curien(Authors)
- 2007(Publication Date)
- Cambridge University Press(Publisher)
As Carl Shapiro and Hal Varian point out, among others, this characteristic opens up new perspectives in the way infor-mation goods, and to a certain extent knowledge, can be distributed and produced. Knowledge has indeed to be contrasted with information goods since it is a “good” that magnifies some of the characteristics of information goods – e.g. knowledge generates new knowledge, leading to spillover effects – and since some of its characteristics are different from the average information goods. For instance, common wisdom states that it is rather cheap to consume information (although this is questionable since it assumes that the consumer is “equipped” with knowledge and technologies to decode, to interpret and to use or to enjoy the received signal), while using knowledge requires not only being “equipped” with the cognitive capacities to understand the new know-ledge but also being able to absorb the knowledge, i.e. to understand it and combine it with the mastered stock of knowledge. That said, a lot of what can be drawn from the analysis of information production and distribution can be adapted to the economics of knowledge, and vice versa (see Foray [ 2004 ] for an analysis of the main differences). Being oriented towards the analysis of exchange rather than produc-tion, economists have been devoting a lot of attention to the marketing and pricing of information goods over recent years. To put it as simply as possible, due to marginal costs tending to zero and to the ability to copy information at a low price (and to crack code when it is encrypted), price competition is impossible to sustain in the digital world. Optimal strategies for information producers are to try to attain a monopoly Internet economics, digital economics 41
eBook - PDFThe Wealth of Networks
How Social Production Transforms Markets and Freedom
- Yochai Benkler(Author)
- 2008(Publication Date)
- Yale University Press(Publisher)
A particular confluence of technical and economic changes is now altering the way we produce and exchange information, knowledge, and culture in ways that could redefine basic practices, first in the most advanced econo-mies, and eventually around the globe. The potential break from the past 150 years is masked by the somewhat liberal use of the term “information economy” in various permutations since the 1970s. The term has been used widely to signify the dramatic increase in the importance of usable infor-mation as a means of controlling production and the flow of inputs, outputs, and services. While often evoked as parallel to the “postindustrial” stage, in fact, the information economy was tightly linked throughout the twentieth century with controlling the processes of the industrial economy. This is clearest in the case of accounting firms and financial markets, but is true of the industrial modalities of organizing cultural production as well. Holly-wood, the broadcast networks, and the recording industry were built around a physical production model. Once the cultural utterances, the songs or movies, were initially produced and fixed in some means of storage and transmission, the economics of production and distribution of these physical goods took over. Making the initial utterances and the physical goods that embodied them required high capital investment up front. Making many copies was not much more expensive than making few copies, and very much cheaper on a per-copy basis. These industries therefore organized themselves to invest large sums in making a small number of high production-value cultural “artifacts,” which were then either replicated and stamped onto many low-cost copies of each artifact, or broadcast or distributed through high-cost systems for low marginal cost ephemeral consumption on screens and with receivers. This required an effort to manage demand for those
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