The Information Economy:
I'm reading Hal Varian and Carl Shapiro's Information Rules (nice double
entendre) and finding much insight there for the 'information economy.'
Here are a few excerpts, posed in a fictional Q & A format, that may lead to
some new perspectives in our continuing discussion about branding. The answers
are all quotes from the book:
Q: First of all what is 'information' exactly?
A: Essentially anything that can be digitized—encoded as a stream of bits—is
information. For our purposes, baseball scores, books, databases, magazines,
movies, music, stock quotes, and Web pages are all information goods. (p.3)
Q: How do pricing structures differ in the Information Age?
A: Information is costly to produce but cheap to reproduce. . .therefore, you
must price your information goods according to consumer value, not according
to your production costs. (p.3)
Q: But what about a product that consumers have no idea how to value because
they haven't experienced it yet?
A: Economists say that a good is an experience good if consumers must
experience it to value it. Virtually any new product is an experience good,
and marketers have developed strategies such as free samples, promotional
pricing, and testimonials to help consumers learn about new goods.
Most media producers overcome the experience good problem through branding and
reputation. The main reason that we read the Wall Street Journal today is that
we have found it useful in the past. ( p.5)
Information Rules: A Strategic Guide to the Network Economy, Hal R. Varian and
Carl Shapiro, Harvard Business School Press, 1999. The first chapter is
available on Varian's home page http://sims.berkeley.edu/~hal/
