Summary of Information Rules by Shapiro and Varian Essay

12382 Words Oct 17th, 2012 50 Pages
Information Rules
1 The information Economy
Tech changes, economic laws do not.
INFORMATION
Information – anything that can be digitized.
Info has an unusual cost structure. Costly to create and assemble. Costly to produce but cheap to reproduce. High fixed costs but low marginal costs.
When managing intellectual property, goal should be to maximize the value of your intellectual property, not its protection.
Experience good – must be experienced in order to be valued. Information is always an experience good. Browsing sure, but branding and reputation is how many producers overcome the experience good problem.
The internet is a hybrid between a broadcast medium and point to point medium.
TECHNOLOGY
Improved information
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Play tough. If would-be entrants to your market expect you to start a price war they will be discouraged from entering the market in the first place.
Competitive advantages based on access to raw information are under siege; the trick is to migrate incumbency and scale advantages into value-added aspects of information, where advantage is more sustainable.
Personalizing your product
If you can create a unique source of information and avoid commoditization, you have some breathing room in terms of pricing and product design. How to make the most of it? Personalize or customize your product to generate the most value for your customers, secondly, establish pricing arrangements that capture as much of that value as possible.
Know your customer
The two main ways to get user information is (1) registration and billing and (2) observation (by means of their search queries and clickstream).
Clickstream – the sequence of actions users take while visiting your site.
Pricing your product
If the info products you sell are highly tuned to your customers’ interests you will have a lot of pricing flexibility, since you won’t have to worry as much about generic competitive products.
Purest example of tailored goods are research reports, such as those by Gartner Group etc.
Price discrimination. Since the internet is a point-to-point medium it is (theoretically) possible to use perfect price

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