Information Economics and the Internet

Abstract

Information economics offers insights into the dynamics of information across networked systems like the Internet. An information marketplace is different from other marketplaces because an information good is not actually consumed and can be reproduced and distributed at almost no cost. For information producers to remain profitable, they will need to minimize their exposure to competition. For example, information can be sold by charging site access rather than information access fees, or it can be bundled with other information or “versioned.” For information consumers, a variation of Malthus' law predicts that the exponential growth in information will mean that specific information will become increasingly expensive to find, because search costs will grow but human attention will remain limited. Furthemore, the low cost of creating poor-quality information on the Web means that the low-quality information may eventually swamp high-quality resources. The use of reputable information portals on the Web, or smart search technologies, may help in the short run, but it is unclear whether an “information famine” is avoidable in the longer term.