Table of Contents

Handbook on the Economics of the Internet

Handbook on the Economics of the Internet

Edited by Johannes M. Bauer and Michael Latzer

As the single most important general purpose technology of recent times, the Internet is transforming the organization, competitive structure and business models of the private, the public and non-profit sectors. In 27 original chapters, leading authors discuss theoretical and applied frameworks for the study of the economics of the Internet and its unique economics as a global information and communications infrastructure. They also examine the effects of the Internet on economic transactions (including social production, advertising, innovation, and intellectual property rights), the economics and management of Internet-based industries (including search, news, entertainment, culture, and virtual worlds), and the effects of the Internet on the economy at large.

Chapter 1: The economics of the Internet: an overview

Johannes M. Bauer and Michael Latzer

Subjects: economics and finance, industrial economics, innovation and technology, technology and ict


In the Internet economy many of the theoretical assumptions and historical observations upon which economics rests need to be reexamined. Economics built a very successful research program by focusing on the choices and behavior of rational individual decision-makers under conditions of scarcity. In this highly stylized framework, eventually increasing incremental costs, decreasing marginal utility and resource constraints result in negative feedback that moves economic processes toward equilibrium states. The rigorous analysis of these equilibria at the micro and macro level was a major achievement of economics. In an economy built around digital technology some of these conditions change fundamentally. Scale economies, interdependencies, and abundance are pervasive and call for analytical concepts that augment the traditional approaches.