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Kurt DeMaagd and Johannes M. Bauer

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Edited by Johannes M. Bauer and Michael Latzer

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Johannes M. Bauer and Michael Latzer

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.

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Günter Knieps and Johannes M. Bauer

Outlining the elements of an industrial organization of the Internet requires an operational delineation of its boundaries and reliance on theoretical frameworks appropriate to its rapid pace of change. We respond to the first challenge by examining the Internet as a multi-layered socio-technical system. Embracing an inclusive perspective of the entire Internet ecosystem we differentiate, where appropriate, network infrastructure from applications and services based on this infrastructure. In addition, we analyze the emerging overall economic properties of the Internet. The conceptual challenges are addressed by grounding our approach in the economics of technologically dynamic industries with rapidly evolving markets.

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Volker Schneider and Johannes M. Bauer

During the past decades considerable progress has been made in developing research methods that are particularly suited to examining network relations in the Internet and their consequences for outcomes such as the diffusion of applications and services, the winner-take-all dynamics of digital markets, and the spread of malware. Social scientists have long recognized the importance of interdependencies among agents in social systems and the need for coordination in an economy with division of labor. Network science provides powerful tools to analyze both topics in innovative ways. It needs to be distinguished from two other emerging fields – Internet science and web science – which share common interests but do not primarily use network science tools. This chapter provides an overview of network science methods and their potential to study the Internet and its economic effects.

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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.
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Michel van Eeten and Johannes M. Bauer

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Hadi Asghari, Michel van Eeten and Johannes M. Bauer

The Internet has enabled tremendous economic and social innovation yet the underlying systems, networks and services sometimes fail miserably to protect the security of communications and data. Security incidents occur in many forms, including but not limited to the leaking and theft of private information, unauthorized access to information, malicious alteration of data, or software and service unavailability. Given the complexity of the problem, it seems improbable that security can be attained by eliminating all vulnerabilities. Moreover, preventative security measures are costly. Some level of uncertainty will therefore have to be accepted and choices need to be made, trading off competing objectives and limited resources. Recent research has developed approaches to better explain why certain security failures occur and others do not. These contributions clarified that security is not merely a technical problem that can be fixed with engineering solutions but that is also has important economic and behavioral dimensions that need to be addressed. Examining the incentives of players in the information and communication technology (ICT) ecosystem has been particularly fruitful in explaining the landscape of vulnerabilities and attacks that can be observed. The core of this work is rooted in information security economics. This chapter surveys the state of the art of the existing research with a focus on the criminal threats to cybersecurity.