This paper critically analyzes the article “Information economics and the Internet” written by Enrico Coiera (2000) relating the specificity of the information goods market. Detailed analysis of the differences between information goods and other tangible goods, kind of required market structure for information goods, description of the Malthusian problem are given in this paper. Moreover, the changes that have place nowadays comparing to the facts described in the article are pointed on the example of the chosen information good – articles in electronic journals.
Regarding the meaning and characteristics of the “information goods”, Coiera (2000) states that information good is information that can be digitalized and has market value. Linde and Stock (2011) give the following definition of the information good: “an information good is everything that is or can be available in the digital form, and which is regarded as useful by economic agents” (p. 24).
Coiera (2000) underlines that the main difference between information good and ordinary consumer good is that the buyer gets to know whether the information he/she bought was useful for him\her only after the purchase. Traditional goods such as food do not need pre-use because they have particular set of well-known characteristics. Production of the information goods is based on the high fixed costs (for instance production of the movie), but the result of such a production can be copied easily (Low, 2002). Therefore, marginal costs for information goods reproduction are low or equal to zero.
It is important to highlight that regarding the possibility of the copying without any restriction, information goods are never consumed, they are “non-rival” that means that traditional law for the tangible goods – the scarcity – cannot be apply. Moreover, information in the digital form can be transferred any time anywhere and the person does not lose the object of knowledge – information is in his/her head. It is impossible to do such an act with the tangible assets (Coiera, 2000).
Under the contemporary circumstances and the type of market, when the consumer of information goods desires and is used to obtain them free of charge, and when the producers face a great dilemma how to return the costs, the following scenarios are applicable. Coiera (2000) encourages the information goods producers to recreate the monopoly market for information goods. First of all, high-quality information goods are easily differentiated. By creating a brand identity with the source of such differentiated information goods, producer can earn more. Development of the pay-per-view model will also assist to control the consumption of the high-quality Web content.
Bundling several items in one purchase is considered to be effective tool for getting additional revenues. A creative approach to marketing and pricing for different groups of consumers can also lead to an increase in revenue (Coiera, 2000).
Coiera (2000) also indicates that the paraphrased Malthusian’s law for the information goods market will result in the situation when the volume of information will grow exponentially, but the opportunity to find the needed piece of information will decrease. In other words, when a search engine with the growth of various quality levels information will propose more documents for a consumer’s evaluation, the consumption of such information will be decreasing to zero. The price for such search and time for the evaluation of these documents will grow, and in the future it will be very expensive to find what the person searches for.
This problem can be solved by regulation in the sphere of the low-quality information publishing in the Web through implementation of the quality standard marks for the high-quality and reliable sources. This is very important in particular in the medical sphere as Coiera (2000) underlines. Another opportunity to solve the prediction of the Malthusian problem is the development of the progressive technologies for the searching engine. They will allow to filter the low-quality content and to consider the needs of the particular consumer of specific information.
For the analysis of the Coiera’s findings application, I chose the information goods – articles in electronic journals. This information good has all the characteristics described above – it can be easily copied and transferred through the file-sharing thus this information good is non-excludable. If the person has the possibility to obtain it free of charge due to the unlimited access, then he/she will not pay more for this item.
Regarding the changes that happened from the time the article was written, it is crucial to indicate the following. According to Linde and Stock (2011), nowadays valuable information is sold at the market where the monopoly dominates through the implementation of the strict copyright. In music industry, for instance, cartel structures influence the unjustified price increases.
Analyzing the Malthusian problem, I think that the situation is worse now that it was described by the author of the article. The evident progress in search technologies is not seen, the number of copywriters with little or no experience sharing low-quality digital content increases, the pirates work activates. It is a real problem to filter all the information that the search engine proposes and find the reliable source which is the primary source. I fully agree with Coiera (2000) that we will experience “information famine” with such an exponential growth of information volume and our inability to find what we need due to the scarce of time, attention and the low quality of what we are proposed to consume via the Internet.
- Coiera, E. (2000). Information economics and the Internet. Journal of the American Medical Informatics Association, 7 (3), pp. 215-221.
- Linde, F. & Stock, W. G. (2011). Information markets: a strategic guideline for the I-commerce.New York: Hubert & Co.
- Low, L. (2002). Economics of information technology and the media. New Jersey: World Scientific Publishing.