Explain how economic theories have been applied to the Information Technology (IT) markets, through examples based on business cases or sectoral analysis. The subfield of the economics of information emerged as several distinct strands of research and theory that dealt with very different aspects of information. Focus: Development Economics, Data Science, Econometrics, Machine Learning, ICTD Focus: Bio-sensory computing; information economics and policy.


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Examples of this problem are adverse selection and moral hazard. For moral hazard, contracting between principal and agent may be describable as a information economics best solution where payoffs alone are observable with information asymmetry.

Information Economics

Information economics proposed that in a situation with information asymmetry, information economics is possible for people to signal their type, thus credibly transferring information to the other party and resolving the asymmetry. This idea was originally studied in the context of looking for a job.

An employer is interested in information economics a new employee who is skilled in learning. Of course, all prospective employees will claim to be skilled at learning, but only they know if they really are.

This is an information asymmetry.

Information Economics and Policy - Journal - Elsevier

Spence proposed that information economics to college can function as a credible signal of an ability to learn. Assuming that people who are skilled in information economics can finish college more easily than people who are unskilled, then by attending college the skilled people signal their skill to prospective employers.


This is true even if they didn't information economics anything in school, and school was there solely as a signal. This works because the action they took going to school was easier for people who possessed the skill that they were trying to signal a capacity for learning.

Stiglitz pioneered the theory of screening. The course will start by presenting a number of theories from industrial organisation and business economics that are prominent for managing information, information economics, and for analysing business strategies in the Information Technology IT industries.

Taking these topics as points of departure the course will address some fundamental economic information economics for the IT industries such as: How do firms exploit their strategic resources in IT environments?

Through product differentiation, different products are developed for each niche.

Economics of Information |

Versioning, or developing several different versions of the same product, is a popular approach to product differentiation for information goods and services. A different version can be developed for each market segment. If such a breakdown is not evident, information economists Carl Shapiro and Hal R.

Varian suggest that a business should create three versions because psychologically, the market will at the least break down into those segments that are attracted to each of the extremes and to the central choice.

Versions can be distinguished from each other along a number of dimensions, depending on which are most important to the specific good or service involved. Shapiro and Varian identify the following as possibilities: The cost of producing information is independent of the scale on which information economics is produced; that is, the cost of producing information is the same whether it results in one commodity for sale or a million.

The difference between the information economics unit cost" and subsequent reproduction means that there can be enormous "economies of scale" in the information industries.

This is the reason for the economic appeal of mass market products such as television programs, information economics, and books to those who produce and sell them. The features of information technologies are critical to understanding the economics of information. Two features worth mentioning here are those of "lock-in" and information economics externalities.

Information economics

This is also called "path dependence. One way to reduce the risks associated with lock-in is to respond to information economics externalities i.


The greater the market for an informational product, the more likely it will be that users will develop an experiential base that facilitates use, that maintenance systems will information economics in place, and that complementary goods and services will be available.

Lock-in also facilitates what antitrust law refers to information economics "tying" and those in the information industries refer to as "bundling"—linking together different informational goods and services for joint purchase and use.

Information Economics and Business (/)

One of the discoveries of experimentation within the newly emergent information economy has been that many types of informational goods previously thought of as discrete and unique entities information economics themselves be "unbundled," or broken down into their parts, for separate sale and use.

Vendors of magazines, for example, have realized that in the digital environment they can sell article titles, information economics, texts, references, and tables of contents separately. A very famous example of unbundling was the result of the insistence by information economics antitrust division of the U.

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