Office: SM 3.801
Hours: R. 3-5 or by appointment
Economics of Information Goods
This is a course about the economics of information goods, those goods at the center of the modern economy. Hopefully, you will learn how information goods differ from regular goods, the nature of property rights in these markets, how these goods should be priced, problems with copying these goods, and how markets with information goods evolve. We also will apply these and other basic economic concepts to an understanding of how the Internet economy is developing, why the dotcoms went belly up, and some public policy issues.
There is no single textbook that covers the material for this course. First, I have a book called Rethinking the Network Economy published by Amacom in September of 2002. This is as close as we can get to a definitive textbook. A second useful book is Information Rules by Shapiro and Varian. It is simple enough to read very quickly but doesn't provide the level I detail I would like to you get. Plus, I will disagree with the authors from time to time. Third, some of you may find my book with Stephen Margolis titled: Winners, Losers & Microsoft to be useful. All these books are much less expensive than the typical textbook so it should be easy to stay within you budget. I hope you still have your MECO 6201 (6303) textbook (for example, Landsburg's Price Theory and Applications), since it will have useful background material. There are also additional readings that will are accessible through the web. The easiest way to get the readings is to go to my web page and follow the instructions to this reading list which will allow you to click on the links.
There is also an online course that covers much of the same material. That course includes a CD with PowerPoint slides and audio files for the slides. The CD is available in the bookstore and you might wish to purchase it, particularly if you are likely to miss some classes or want to go through the material at a slower pace. The material on the CD is not identical, however, and you should keep track of what is going on in class. It is possible to get slightly dated copies of my power point slides and even my lectures since this course is an offline version of the online MECO 6311 course. All of these files can be purchased on a CD in the bookstore. Most students find the CD the most convenient solution. You can get just the PowerPoint slides from my website:
Grading is 40% for the midterm, 60% for the final.
To give you an idea of what my tests are like, I include a sample test that can be found
Module 1 Price Discrimination, Versioning, Tie-Ins Sales and Bundling
*Shapiro and Varian, Chapter 3.
*Material in your old micro text (such as Landsburg) that talks about elasticity, monopoly, and price discrimination
*Stigler, G. "A note on block booking", The Supreme Court Review, 1963.
Liebowitz, S. "Tie-In Sales and Price Discrimination," Economic Inquiry, July, 1983. Also:
Schmalensee, R. "Commodity Bundling by Single-Product Monopolies, Journal of Law and Economics, April 1982.
Module 2 Public Goods and Intellectual Property
Landsburg: Chapter 14.2, Public Goods
*Liebowitz S. “Intellectual Property” forthcoming in the Concise Encyclopedia of Economics
*Julie E. Cohen “Copyright and the Perfect Curve” 53 Vand. L. Rev. 1799
* Stan Liebowitz and
Demsetz H. "The Private Production of Public Goods", Journal of Law and Economics, October 1970.
Liebowitz, S. "Some Puzzling Behavior by the Owners of Intellectual Products," Contemporary Policy Issues, July, 1987, pp. 44-53. Or
Play God – determine the ideal copyright
*Rethinking the Network Economy: Chapter 7
*Hal R. Varian “Copying and Copyright” Forthcoming in Journal of Economic Perspectives, draft
*Liebowitz, S. J., "Copying and Indirect Appropriability: Photocopying of Journals," Journal of Political Economy, October 1985, 945-957. Also:
Benjamin D. and Kormendi, R. "On the Interrelationship between Markets for New and Used Durable Goods," Journal of Law and Economics, Oct. 1974, pp. 381-402.
Liebowitz, S. J., "Durability, Market Structure and New Used Goods Models," American Economic Review, September, 1982, pp. 816-824. Also:
Shapiro and Varian, Chapter 4
*Felix Oberholzer and
*Stan Liebowitz “Pitfalls in the Analysis of file-sharing” click here
“Appeals Court Blocks RIAA Efforts to Identify Music Downloaders” WSJ
“How record companies could embrace
Napster and maintain profits” From Linux World,
Brian Ploskina “Numbers Rock 'N' Roll in Napster Dispute”, Inter@ctive Week,
Lee Gomes “Judge Orders Napster to Stop Downloads of Copyrighted Music” Wall
Story about RIAA beginning to prosecute students click here
"Nipping It In The Bud: Monsanto isn't just talking tough on seed piracy; it's taking action." Story about Monsanto's genetically engineered seeds and how it keeps farmer from making 'copies'.
*Chapter 6 in William Fisher’s forthcoming book on Intellectual Property: http://cyber.law.harvard.edu/people/tfisher/PTKChapter6.pdf
*”Alternative Copy Systems: The Problems with a Compulsory License”, Stanley
J. Liebowitz, (Vol. 1, No. 2,
“Impose a Noncommercial Use Levy to Allow Free P2P File-Swapping and Remixing”, Neil Weinstock Netanel,
*Rethinking the Network: Chapters 1, 2, 3
*W. Brian Arthur, Positive Feedbacks in the Economy, Scientific American, Feb. 1990 also at:along with other Arthur papers.
Shapiro and Varian, Chapters 5, 6, 7, 8, 9.
Katz, M. L., and Shapiro, C., "Systems Competition and Network Effects," Journal of Economic Perspectives (Spring 1994).
Leibenstein, Harvey, “Bandwagon, Snob, and Veblen Effects in the Theory of Consumers’ Demand” Quarterly Journal of Economics May 1950. Available in the electronic journal section of McDermott Library
Brynjolfsson, Erik and Kemerer Chris F., “Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market,” Management Science, December 1996.
David, Paul A. “Path dependence and the quest for historical economics: one more chorus of the ballad of QWERTY”.
*David, Paul. A. 1985. "Clio and the Economics of QWERTY", 75 American Economic Review, 332-7 (May).
*Liebowitz, S. J. and Margolis, S. E. "The Fable of the Keys,"
JLE, April 1990, pp. 1-26. Click Here.
“Product Quality and the Economic Performance of Firms,” Stan Liebowitz,
report for McKinsey and Company,
Liebowitz and Margolis,
“Economists Decide to Challenge Facts
of the QWERTY Story” Lee Gomes, Wall
Shapiro and Varian, Chapter 9, 10
*Rethinking the Network: Chapter 4, 5
*“So Long , Supply and Demand: There's a new economy out there -- and it
looks nothing like the old one”, by Thomas Petzinger Jr.,
* “Will the Net Turn Car Dealers into Dinosaurs? State Limits on Auto Sales Online” Solveig Singleton at
Wired News “Webvan's $1 Billion Soup Job”, Joanna Glasner, July 9, 1999, Available at:
Telser, L. G., "Why Should Manufacturers Want Fair Trade?" Journal of Law and Economics, October 1960
*“How the Internet Bubble Broke Records, Rules, Bank Accounts” Greg Ip,
Susan Pulliam, Scott Thurm, and Ruth Simon, Wall Street Journal,
*Rethinking the Network: Chapter 6
“Are Click-Through Rates Really Declining?” Jim Meskauskas, Internet.com,
*"Prices for ad banners fall" Andrea Petersen, WSJ Interactive
*Millward Brown Interactive 1997 Online Advertising Effectiveness Study:
“The Great Net Giveaway Gimmick”
Jennifer Mack, ZDNet News,
“Pop-Under Web Ads May Backfire, Says Jupiter” Reuters,
Module 5 Antitrust
Landsburg: pp. 398-400
*Liebowitz and Margolis,
*The Wall Street Journal “Time Warner,
*The Wall Street Journal “
Antitrust Abuse in the New Economy: The Microsoft Case by Richard L. Gordon, Edward Elgar (October 2002)
McGee, John. "Predatory Price Cutting: The Standard Oil Case", Journal of Law and Economics, October 1958
You might be interested in a program the
My Interview with ABC news about the impacts of MP3 downloading and copying on the industry
Or, an interview I had with Salon Magazine on MP3 copying: Salon interview:
For class notes (somewhat out of date) go to:
See the Interview with Brian Arthur in Pretext magazine: