SI 646 - Information Economics

Overview
Materials

Image adapted from laurenatclemson under a Creative Commons license: BY.

Term:

Winter 2009

Published:

June 3, 2009

Revised:

June 5, 2013

These materials are from a past semester of this course at the U-M School of Information. For details and a syllabus of the current course, please see https://www.si.umich.edu/programs/courses/646.

This course provides a strong grounding in the economics of information goods and services. Students analyze strategic issues faced by for-profit and not-for-profit organizations: pricing, bundling, versioning, product differentiation and variety, network externalities, and rights management. This course precedes SI 680.

Instructor: Mark McCabe

dScribe: Wentao Wang

Course Level: Graduate

Course Structure: 3 hour lecture, once a week

Reading List

Week 1

Mandatory Read:
1. Carl Shapiro; Hal R Varian, Information rules: a strategic guide to the network economy, ch. 1 Worldcat.org hyperlink
2. Hirshleifer, J. and J. Riley (1992). The Analytics of Uncertainty and Information
(Cambridge Univ. Press). Sections 1.0 – 1.4.1 (pp. 7-19), 1.5 (pp. 23-33), 5.0-5.2.2 (pp.167-187), 5.2.4-5.2.5 (pp. 200-208) (CT) Worldcat.org hyperlink resource

Supplemental Read:
1. DeLong, J. B. and Froomkin, A. M. (2000). "Speculative Microeconomics for
Tomorrow's Economy". First Monday Vol 5 No. 2, February, 2000. (online/CT) 2.
Hirshleifer and Riley, op. cit. Sections 1.6 (pp. 33-39), 5.2.3 (pp. 187-200), 5.3.0-5.3.2 (pp. 209-222) (CT).Worldcat.org hyperlink

Week2

Mandatory Read:
1. Carl Shapiro; Hal R Varian, Information rules: a strategic guide to the network economy, ch. 2 Worldcat.org hyperlink
2. Nagle, T. (1984). Economic Foundations for Pricing. Journal of Business, 57 (pt. 1 of 2), s3-s26. (JSTOR) (CT)Worldcat.org hyperlink
3. Sahay, A. (2007), “How to Reap Higher Profits with Dynamic Pricing”, Sloan
Management Review, 48(4/Summer): 53-60. (CT)

Supplemental Read:
1. Bonn, Maria S., Wendy P. Lougee, Jeffrey K. MacKie-Mason and Juan F. Riveros (2008), "The PEAK Project: A Field Experiment in Pricing and Usage of a Digital Collection," in MacKie-Mason, J. and W. Lougee, eds., Economics and Usage of Digital Collections. University of Michigan, Scholarly Publishing Office. (CT) Worldcat.org hyperlink
2. Lancaster, K. (1966). A New Approach to Consumer Theory. Journal of Political Economy, 74(2), 132-157. (CT) (JSTOR) Worldcat.org hyperlink
3. Brooks, Christopher H., Robert S. Gazzale, Rajarshi Das, Jeffrey O. Kephart, Jeffrey K. MacKie-Mason, and Edmund H. Durfee (2002). "Model Selection in an Information Economy: Choosing What to Learn," Computational Intelligence, vol. 18, no. 4 (Nov.): 566-582. (CT) Worldcat.org hyperlink

Mandatory Case: Baradwaj, N. and J. B. Gordon (2007). Atlantic Computer: A bundle of pricing options. Harvard Business School Case 2078. (to be distributed in class)

Week 3

Mandatory Read:
1. Carl Shapiro; Hal R Varian, Information rules: a strategic guide to the network economy, ch. 7
2. Katz, M. L. and Shapiro, C. (1994). "Systems Competition and Network Effects". Journal of Economic Perspectives. 8(2): 93-115. (CT) (JSTOR)
3. Liebowitz, S. J. and Margolis, S. E. (1994). Network Externality: An Uncommon Tragedy. Journal of Economic Perspectives. 8(2): 133-150. (CT) (JSTOR)

Supplementary Read:
1. Rochet, Jean-Charles and Jean Tirole (2005). "Two-Sided Markets: A Progress Report", IDEI Working Paper, 29 November. (CT)
2. Eisenmann, T., G. Parker and M. Van Alstyne (2006). “Strategies for Two-Sided Markets”. Harvard Business Review, October. (CT)

Mandatory Case: U.S. v. Microsoft
1. Gilbert, R. J. and M L. Katz (2001). “An Economist’s Guide to U.S. v. Microsoft”, The Journal of Economic Perspectives, Vol. 15, No. 2. (Spring), pp. 25-44. (CT)
2. Jeffrey Mackie-Mason (JMM), Case Notes.

Week 4

Mandatory Read:
1. Carl Shapiro; Hal R Varian, Information rules: a strategic guide to the network economy, ch. 3 pp. 73-78
2. Bakos, Y., & Brynjolfsson, E. (1999). "Bundling Information Goods: Pricing, Profits, and Efficiency," Management Science, 45(12): 1613-1630. (CT)

Supplementary Read:
1. Brooks, Christopher H., Robert S. Gazzale, Jeffrey K. MacKie-Mason, and Edmund H. Durfee (2004). "Improving Learning Performance by Applying Economic Knowledge", Lecture Notes in Computer Science, vol. 3048 (Springer-Verlag). (CT)
2. MacKie-Mason, Jeffrey K. and Juan Riveros (2000), "Economics and Electronic Access to Scholarly Information," in B. Kahin and H. Varian, eds., Internet Publishing and Beyond: The Economics of Digital Information and Intellectual Property (MIT Press: Cambridge, Mass.), esp. sections 1-3.1, 3.3, 4.2-4.3 (CT)

Mandatory Case: Bundling Academic Journals
1. Edlin, Aaron S. and Daniel L. Rubinfeld (2004). "Exclusion or Efficient Pricing? The "Big Deal" Bundling of Academic Journals", Antitrust Law Journal, 72(1): 119-159. (CT)
2. McCabe, Mark (2002), "Journal Pricing and Mergers: A Portfolio Approach."
American Economic Review, Vol. 92(1, March):259-269. (CT)
3. JMM, Case Notes.

Week 5

Mandatory Read:
1. Carl Shapiro; Hal R Varian, Information rules: a strategic guide to the network economy, ch. 4
2. Dirk Bergemann, Thomas Eisenbach, Joan Feigenbaum, Scott Shenker, Flexibility as an Instrument in Digital Rights Management. In Workshop on the Economics of Information Security 2005. (CT)

Mandatory Case: File Sharing
1. Felix Oberholzer and Koleman Strumpf (2007). The Effect of File Sharing on Record Sales: An Empirical Analysis”.Journal of Political Economy, 115(1): 1-42. (CT)
2. Liebowitz, S. (2007), “A Comment on the Oberholzer-Gee and Strumpf Paper on File- Sharing”, Working paper, University of Texas at Dallas (September). Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1017418. (CT)
3. JMM, Case Notes.

Week 6

Mandatory Read:
1. Chris Anderson (2006), The Long Tail (Hyperion), chs. 1, 2, 8. (CT)
2. Brynjolfsson, E., Y. J. Hu, M. D. Smith (2006). “From Niches to Riches: Anatomy of the Long Tail”, MIT Sloan Management Review, 47(4), 67-71. (CT)

Mandatory Case: Long wait for long tail?
1. Wu, T. (2006), “The Wrong Tail”, Slate, 21 July. (CT)
2. Gomes, L. (2006), “It May Be a Long Time Before the Long Tail Is Wagging the Web”, The Wall Street Journal, 26 July. (CT)
3. JMM, Case Notes.

About the Creators

Mark McCabe

Mark McCabe is an Adjunct Associate Professor in the University of Michigan School of Information. After receiving his Ph.D. in applied economics from MIT's Sloan School of Management, McCabe joined the Economic Analysis Group in the U.S. Justice Department's Antitrust Division in Washington, D.C. While at the Department of Justice, his responsibilities included the analysis of anti-competitive practices, mergers, and federal economic regulation. During this time, he also served as an adjunct professor at American University.

From 1998 to 2007, McCabe was an assistant professor in the School of Economics at the Georgia Institute of Technology. He was a lecturer at the Stephen M. Ross School of Business at the University of Michigan in 2007-2008. His other affiliations include the Sloan Industry Studies Program and the State Center's Panel of Economists, and in the past the National Research Council.

McCabe's research in the field of industrial organization currently focuses on the economics of digital information goods markets (with a particular interest in scientific publishing) and the implications of the online environment for competition policy. This research has been published in various scholarly journals, including the American Economic Review, the Rand Journal of Economics, and Nature and has been supported by grants from the Andrew W. Mellon Foundation, the NET Institute, and the Open Society Institute. On occasion it has also been cited in publications such as Le Monde, Nature, the New York Times, Science, and the Wall Street Journal. more...

Ph.D., Applied Economics, Sloan School of Management, MIT, 1991
M.S., Technology and Policy, MIT, 1986
A.B., Environmental Studies, Brown University, 1982