15.575
Economics of Information and Information Technology
Builds upon relevant economic theories and methodologies to analyze the changes in organizations and markets enabled by digital technologies. Examines information economics, labor economics, industrial organization and price theory, growth theory, intangible asset valuation, incomplete contracts theory, and design of empirical studies. Extensive reading and discussion of research literature explores the application of these theories to business issues with relevant guest speakers. Students will complete a final research paper and presentation. Primarily for doctoral students.
Spring 2004 · Research Seminar in IT and Organizations: Economic Perspectives
Topics
- Introduction: Versioning and Price Discrimination
- Pricing Information
- Search and Competition I
- Search and Competition II
- Reputation, Trust and Recommender Systems
- Economics of Networks, Standards and Lock-In
- IT and Productivity
- The Principal-Agent Model of the Firm
- Managerial Views of the Firm
- Incomplete Contracts and Firm Boundaries
- Student Presentations
- Student Presentations (cont.)
- The Future of the Information Economy
Readings
- Varian, H. “How to Build an Economic Model in your Spare Time.” In Passion and Craft: Economists at Work . Edited by Michael Szenberg. Ann Arbor, MI: University of Michigan Press, 1999. ISBN: 0472066854.
- Armstrong, S. “Management Science.” Marketing Bulletin 9 (1998): 1-15.
- Davis, M. “That’s Interesting! Towards a Phenomenology of Sociology and a Sociology of Phenomenology.” Philosophy of Social Science 1 (1971): 309-344.
- Varian, H. Federal Reserve Remarks; Brynjolfsson Comment on Varian . Jackson Hole Conference, 2001.
- Varian, H. “A Model of Sales. ” American Economic Review 70, no. 4 (1980): 651-659.
- Varian, H. “Errata: A Model of Sales.” American Economic Review 71, no. 3 (1981): 517.
- Shapiro, C., and H. Varian. “Pricing Information.” In Information Rules: A Strategic Guide to the Network Economy. Cambridge, MA: Harvard Business School Press, 1998, Chapter 2. ISBN: 087584863X.
- Shapiro, C., and H. Varian. “Versioning Information.” In Information Rules: A Strategic Guide to the Network Economy. Cambridge, MA: Harvard Business School Press, 1998, Chapter 3. ISBN: 087584863X.
- Liebowitz, S. “Copying and Indirect Appropriability: Photocopying of Journals.” Journal of Political Economy 93, no. 5 (1985): 945-957.
- Varian, H. “Buying, Sharing and Renting Information Goods.” The Journal of Industrial Economics XLVIII, no. 4 (December 2000): 473-488.
- Bakos, Y., and E. Brynjolfsson. “Bundling Information Goods.” Management Science 45, no. 12 (1999): 1613-1630.
- Bakos, Y. and E. Brynjolfsson. “Bundling and Competition on the Internet.” Marketing Science 19, no. 1 (Winter 2000): 63-82.
- Nalebuff, B. R. “Bundling & Barriers to Entry.” Yale Economics, Working Paper, 2003.
- Parker, G., and M. van Alstyne. “Information Complements, Substitutes, and Strategic Product Design,” Working Paper, 2000.
- Recommended Readings
- Bakos, Y., and E. Brynjolfsson. “Aggregating and Disaggregating Information Goods.” In Proceedings of Internet Publishing and Beyond : The Economics of Digital Information and Intellectual Property , 1999.
- Spence, A., and B. Owen. “Television Programming, Monopolistic Competition and Welfare.” Quarterly Journal of Economics 91, no. 1 (1977): 103-26.
- Conner, K., and R. Rumelt. “Software Piracy: An Analysis of Protection Strategies.” Management Science 37, no. 2 (February 1991): 125-139.
- Hitt, L. M., and P. Chen. “Bundling with Customer Self-Selection: A Simple Approach to Bundling Low Marginal Cost Goods.” GSIA Working Paper #2003-E33.
- Sundararajan, A. “Non-linear Pricing of Information Goods.” Working Paper, NYU Stern School of Business, December 2002.
- Lec #: 3 · TOPICS: Search and Competition I · READINGS: Required Readings
- Stiglitz, J. “Imperfect Information in the Product Market.” In Handbook of Industrial Organization . Vol. 1. Edited by Schmalensee, R., and R. Willig. Amsterdam, North Holland: Elsevier Science, 1989, pp. 769-844. (Read especially pp. 771-823).
- Diamond, P. “Search Theory.” In The New Palgrave: Allocation, Information, and Markets . Edited by J. Eatwell, M. Milgate, and P. Newman. Basingstoke, UK: MacMillan Press, 1989. ISBN: 0333495381.
- Bakos, Y. “Reducing Buyer Search Costs: Implications for Electronic Marketplaces.” Management Science 43, no. 12 (December 1997): 1676-1692.
- Salop, S., and J. Stiglitz. “Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion.” Review of Economic Studies 44, no. 3 (October 1977): 493-510.
- Brynjolfsson, E., and M. Smith. “Frictionless Commerce? A Comparison of Internet and Conventional Retailers.” Management Science 46, no. 4 (April 2000): 563-585.
- Stigler, G. “The Economics of Information.” The Journal of Political Economy 69, no. 3 (June 1961): 213-225.
- Pepall, L., G. Norman, and D. Richards. “Miss Daisy and Her Antique Cars.” In Industrial Organization: Contemporary Theory and Practice. St. Paul, MN: South-Western Publishing Company, 1999, Chapter 3.1-3.2. ISBN: 0538859482.
- Pepall, L., G. Norman, and D. Richards. “Product Variety and Price Discrimination.” In Industrial Organization: Contemporary Theory and Practice. St. Paul, MN: South-Western Publishing Company, 1999, Chapter 4.1-4.2. ISBN: 0538859482.
- Pepall, L., G. Norman, and D. Richards. “Price Competition.” In _Industrial Organization: Contemporary Theory and Practice._St. Paul, MN: South-Western Publishing Company, 1999, Chapter 5.4. ISBN: 0538859482.
- Lec #: 4 · TOPICS: Search and Competition II · READINGS: Required Readings
- Lynch, J., and D. Ariely. “Wine Online: Search Costs and Competition on Price, Quality, and Distribution.” Marketing Science 19, no. 1 (Winter 2000): 83-103.
- Goolsbee, A. “Competition in the Computer Industry: Online vs. Retail.” Journal of Industrial Economics 49, no. 4 (2001): 487-499.
- Brynjolfsson, E., and M. Smith. “The Great Equalizer? Consumer Choice Behavior at Internet Shopbots.” Working Paper, MIT Sloan School of Management, July 2000.
- Baye, M., and J. Morgan. “Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets.” American Economic Review 91, no. 3 (June 2001): 454-474.
- Resnick, P., and R. Zeckhauser. “Trust Among Strangers in Internet Transactions: Empirical Analysis of eBay’s Reputation System. The Economics of the Internet and E-Commerce.” In Advances in Applied Microeconomics . Vol. 11. Edited by Michael R. Baye. Amsterdam, North Holland: Elsevier Science, 2002.
- Resnick, P., and R. Zeckhauser. “Recommender Systems.” Communications of the ACM 40, no. 3 (March 1997): 56-58.
- Dellarocas, C. “The Impact of Online Opinion Forums on Competition and Marketing Strategies.” MIT Sloan Working Paper, 2004.
- Dellarocas, C. “The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms.” Management Science 49, no. 10 (2003): 1407-1424.
- Miller, N., P. Resnick, and R. Zeckhauser. “Eliciting Honest Feedback in Electronic Markets.” Working Paper, Kennedy School of Government, Research Paper Series, August 2002.
- Lucking-Reiley, D. “Auctions on the Internet: What’s being Auctioned and How?” Journal of Industrial Economics 48, no. 3 (200): 227-252.
- Dellarocas, C. “Efficiency and Robustness of Binary Feedback Mechanisms in Trading Environments with Moral Hazard.” MIT Sloan Working Paper 4297-03, April 2003.
- Farrell, J., and P. Klemperer. “Coordination and Lock-In: Competition with Switching Costs and Network Effects.” Draft Prepared for_The Handbook of IO_. December 2001.
- Katz, M. and C. Shapiro. “Networks Externalities, Competition and Compatibility.” American Economic Review 75, no. 3 (June 1985): 424-440.
- Liebowitz, S. J., and S. Margolis. “Network Externality: An Uncommon Tragedy.” Journal of Economic Perspectives 8, no. 2 (Spring 1994): 133-150.
- Brynjolfsson, E. and C. Kemerer. “Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market.” Management Science 42, no. 12 (December 1996): 1627-1647.
- Varian, H. “Why Is That Dollar Bill in Your Pocket Worth Anything?” New York Times 15 January 2004.
- Klemperer, P. “Markets with Consumer Switching.” Quarterly Journal of Economics 102, no. 2 (May 1987): 375-394.
- Economides, N. “The Economics of Networks.” International Journal of Industrial Organization 14, no. 2 (March 1996).
- Arthur, W. B. “Competing Technologies, Increasing Returns, and Lock-In by Historical Events.” The Economic Journal 99, no. 394 (March 1989): 116-131.
- Arthur, W. B. “Positive Feedbacks in the Economy.” Scientific American 262 (February 1990): 92-99.
- Riggins, F. J., Kriebel, C. H., and Mukhopadhyay, T. “The Growth of Interorganizational Systems in the Presence of Network Externalities.” Management Science 40, no. 8 (August 1994) 984-998.
- Shapiro, C., and H. Varian. “Networks and Positive Feedback.” In Information Rules: A Strategic Guide to the Network Economy. Cambridge, MA: Harvard Business School Press, 1998, Chapter 7. ISBN: 087584863X.
- Jorgenson, D. “Information Technology and the U.S. Economy.” Presidential Address to the American Economic Association, December 2000.
- Stiroh, K. “Reassessing the Impact of IT in the Production Function: A Meta-Analysis.” Federal Reserve Bank of New York, 2002.
- Gordon, R. “Does the ‘New Economy’ Measure up to the Great Inventions of the Past?” Journal of Economic Perspectives 14, no. 4 (2000): 49-74.
- Brynjolfsson, E., L. Hitt, and S. Yang. “Intangible Assets: Computers and Organizational Capital.” Brookings Papers on Economic Activity 1 (2002): 137-181.
- Autor, D., F. Levy, and R. Murnane. “The Skill Content of the Technology Change.” Quarterly Journal of Economics 118, no. 4 (2003): 1279-1333.
- Brynjolfsson, E., and L. Hitt. “Beyond Computation: IT, Organizational Transformation and Business Performance.” Journal of Economic Perspectives 14, no. 4 (1995): 23-48.
- Brynjolfsson, E., L. Hitt, and S. Yang. “Intangible Assets: How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations.” Proceedings of the 1998 International Conference on Information Systems : 8-29.
- Bresnahan, T., E. Brynjolfsson and L. Hitt. “Information, Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence.” Quarterly Journal of Economics 117, no. 1 (2002): 339-376.
- Stiroh, K. “Information Technology and U.S. Productivity Revival: What do the Industry Data Say?” American Economic Review 92, no. 5 (December 2002): 1559-1576.
- Milgrom, P., and J. Roberts. Economics, organization, and management . Englewood Cliffs, NJ: Prentice-Hall, 1992, Chapter 6, summary pages for Chapters 7,8. ISBN: 0132246503.
- van Zandt, T. “Decentralized Information Processing in the Theory of Organizations.” In Contemporary Economic Development Reviewed, Volume 4: The Enterprise and its Environment . Edited by M. Sertel. London, UK: Macmillan Press, 1997,Chapter 7 (pp. 125-160).
- Jensen, M. and W. Meckling. “Knowledge, Control and Organizational Structure.” In Contract Economics . Edited by L. Werin and H. Hijkander. Cambridge, MA: Basil Blackwell Publishing, 1992, pp. 251-274. ISBN: 0631178937.
- Baker, G., and B. Jorgensen. “Volatility, Noise, and Incentives.” Harvard University Working Paper, March 2003.
- von Hayek, F.A. “The Use of Knowledge in Society.” American Economic Review 35, no. 4 (September 1945): 519-530.
- Williamson, O.E. “Hierarchical Control and Optimal Firm Size.” Journal of Political Economy 85, no. 2 (April 1967): 123-138.
- Autor, D., L. Katz, and A.Krueger. “Computing Inequality: Have Computers Changed the Labor Market?” NBER Working Paper, March 1997.
- Milgrom, P. and J. Roberts. “The Economics of Modern Manufacturing: Technology, Strategy, and Organization.” American Economic Review 80, no. 3 (June 1990): 511-528.
- Ichniowski, C., K. Shaw and G. Prennushi. “The Effects of Human Resource Management Practices on Productivity.” American Economic Review 87, no. 3 (June 1997): 291-313.
- Drucker, P. “The Coming of the New Organization.” Harvard Business Review , January-February 1988. ISBN: B00005RZ1V.
- Galbraith, J. R. “Organizational Design: An Information Processing View.” Interfaces 4, no. 3 (1974): 28-36.
- Radner, R. “Bounded Rationality, Indeterminacy, and the Theory of the Firm.” The Economic Journal 106, no. 438 (September 1996): 1360-1373.
- Brynjolfsson, E., A. Renshaw, M. Van Alstyne. “The Matrix of Change.” _Sloan Management Review_38, no. 2 (1997): 37-54.
- March, J. “Exploration and Exploitation in Organizational Learning.” Organizational Science 2, no. 1 (1999): 71-87.
- Milgrom, P., and J. Roberts. Economics, organization, and management . Englewood Cliffs, NJ: Prentice-Hall, 1992, Chapter 5, especially p. 126-147. ISBN: 0132246503.
- Lec #: 10 · TOPICS: Incomplete Contracts and Firm Boundaries · READINGS: Required Readings
- Milgrom, P., and J. Roberts. Economics, organization, and management . Englewood Cliffs, NJ: Prentice-Hall, 1992, Chapter 16. ISBN: 0132246503.
- Hart, O. “An Economist’s Perspective on the Theory of the Firm.” Columbia Law Review 89, no. 7 (November 1989): 1757-1766.
- Brynjolfsson, E. “Information Assets, Technology, and Organization.” Management Science 40, no. 12 (December 1994): 1645-1662.
- Kumar, K., R. Rajan, and L. Zingales “What determines firm size?” University of Chicago Working Paper, 2001.
- Johnston, R. and P. Lawrence. “Beyond Vertical Integration - the Rise of the Value-Adding Partnership.” Harvard Business Review, (July-August 1998): 94-101.
- Tapscott, D., D. Ticoll, and A. Lowy. Digital Capital . Cambridge, MA: Harvard Business School Press, 2000. ISBN: 1578511933.
- Green, E., and R. Porter. “Noncooperative Collusion under Imperfect Price Information.” Econometrica 52, no. 1. (January 1984): 87-100.
- Gibbons, R. Game Theory for Applied Economists . Princeton, NJ: Princeton University Press, 1992, pp. 88-99, pp. 107-112. ISBN: 0691003955.
- Hart, O. Firms, Contracts, and Financial Structure. Oxford, UK: Clarendon Press, 1995, Chapter 1. ISBN: 0198288816.
- Coase, R. H. “The Nature of the Firm.” Economica 4, no. 16 (1937): 386-405.
- Shapiro, C., and Varian, H., Information Rules: A Strategic Guide to the Network Economy. Cambridge: Harvard Business School Press, November 1, 1998. ISBN: 087584863X.
Prerequisites & course information
Prereq: Permission of instructor G (Spring) 3-0-9 units
Sources
- Course catalogue ↗2026–2027
- MIT OpenCourseWare ↗Spring 2004
- MIT OCW readings ↗
- MIT OCW calendar ↗
- MIT OCW syllabus ↗
- Historical MIT OpenCourseWare offering. Named reading entries and schedule topics are automatically extracted from the linked source pages.