15.567
The Economics of Information: Strategy, Structure, and Pricing
Analysis of the underlying economics of information with business implications. Studies effects of digitization and technology on business strategy and organizational structure. Examines pricing, bundling, and versioning of digital goods, including music, video, software, and communication services. Considers the economic and managerial implications of data-driven decision-making, search, platform competition, targeted advertising, personalization, privacy, network externalities, and artificial intelligence. Readings on fundamental economic principles provide context for industry speakers and case discussions.
Fall 2010 · The Economics of Information: Strategy, Structure and Pricing
Topics
- The economics of information
- Differential pricing, signaling and screening
- Bundling and aggregation
- Measurement, analytics and experimentation
- The long tail
- Wikipedia
- Experimentation, replication and innovation
- Digital advantage
- Social networks
- Student presentations
- Emerging electronic markets
- Future of information economy
Readings
- [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.
- 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.
- 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.
- McAfee, Andrew, and Erik Brynjolfsson. “Investing in the IT That Makes a Competitive Difference.” Harvard Business Review Magazine , July-August 2008.
- “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.
- 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.
- 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.
- Varian, Hal. “Buying, Sharing, and Renting Information Goods.” The Journal of Industrial Economics 48, no. 4 (2000): 473-88.
- “Pricing Information.” Chapter 2 in [S&V].
- “Versioning Information.” Chapter 3 in [S&V].
- 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.
- 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. “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.
- 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.
- 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.
- Arthur, W. Brian. “Increasing Returns and the Two Worlds of Business.” Harvard Business Review Magazine , July-August 1996.
- 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.
- 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].
- 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.
- Edelman, Benjamin, and Thomas Eisenmann. “Google Inc.” Harvard Business School Case. Boston, MA: Harvard Business School Publishing. Case: 910036-PDFENG, January 28, 2010.
- 10 · Measurement, analytics, and experimentation · Re-read: Levy, Steven. “Secret of Googlenomics.” Wired Magazine , May 22, 2009.
- 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.
- 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.
- Garrity, Brian. “DMG Bets on ‘Long Tail’.” Billboard , February 18, 2006.
- Hayek, F. A. “The Use of Knowledge in Society.” American Economic Review 35, no. 4 (1945): 519-530.
- 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.
- Raymond, Eric S. “The Cathedral and the Bazaar.” In The Cathedral and the Bazaar . Sebastopol, CA: O’Reilly Media, Inc., 2001. ISBN: 9780596001087.
- McAfee, Andrew. “The U.S. Intelligence Community (A).” The MIT Center for Digital Business Case. Cambridge, MA: MIT. Case Study 101, October 2009.
- 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.
- 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.
- 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.
- 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.
- 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 Lorin M. Hitt. “Beyond Computation: IT, Organizational Transformation and Business Performance.” Journal of Economic Perspectives 14, no. 4 (2000): 23-48.
- 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.
Prerequisites & course information
Prereq: None G (Spring; second half of term) 3-0-3 units
Sources
- Course catalogue ↗2026–2027
- MIT OpenCourseWare ↗Fall 2010
- MIT OCW calendar ↗
- MIT OCW readings ↗
- MIT OCW syllabus ↗
- Historical MIT OpenCourseWare offering. Named reading entries and schedule topics are automatically extracted from the linked source pages.