Notes for reading <Information Rules> Chapter 1 The Information Economy
"The thesis of this book is that durable economics principles can guide you in today's frenetic business environment. "
Declare 1: In the information industry, software and hardware are inexorably linked. Neither of them is of much value without the other.
Question 1: Does the economic rules of the information industry lead to a "giant company"? Use transaction Cost theory?
Declare 2: Essentially, anything that can be digitized are all information goods. People can gain different kinds of values from the information goods. But regardless of the particular source of value, people are willing to pay for information.
Question 2: Then what factor causes this "Free goods" market phenomenon?
Declare 3: Consumers differ greatly in how they value particular information goods.
Comment 3: that means bundles and consumer discrimination is very helpful. Market segment for price discrimination is different from giving different goods to different markets.
I want to treat "information service" as different market from "information goods", not just different market segments. Then, in each market, price discrimination can be used.
Declare 4: Information goods are cheap to produce but cheap to reproduce.
Comment 4: Someone may say that it is not closely hold in the modern IT industry because the updating and reversioning becomes daily and a unavoidable part of information goods. These costs should be treated as a marginal cost of information goods.
I don't think so. Reversioning, updating and other service related to information goods should be considered separately. IT firms produce an important input - "information goods"- by themselves. Then, these data are put into a special plant- "the market of information goods"- and be manufactured by IG consumers, which is paid for utilities gained from these IGs. Output of this plant is consumers data (whether on behavior or taste). This outputs are inputs of the next plant that use these data for produce "information service". Finally, these IS will be sold to other consumers who are always businesses. In this model, consumers use their time and attention to exchange the utility on IGs. This is an exchange without money and price, just like a manufacturing part in a firm.
But, not every IT company can bear this heavy burden of self-production on input. Is this a barrier entry of the IT industry that will cause monopoly? That may be a reason why there are market power in IT industry now.
Can this process be operated with a market when transaction cost is high? I think it is possible. Now, Google pays for writers and musicians to buy their copyrights and then share this information on Google Books and Google Music (without downloading. Not completely open). In this case, the price system of information goods still works. And this requires the existence of Copyright protection.
Declare 5: There is an economy of attention. Selling viewers' attention is an attractive way to support information provision.
Declare 6: System competition. The dependence of IT on system means that firms must not only focus on their competitors but also their complementors.
Comment 6: this property, which I call "system integrated", set an important position to someone in the IT industry. The position for integrating the system. I think it is not iOS or any hardware, but the excellent capability of integration that helps Apple succeed.