Economics of Information
Yale Braunstein
IS 231 / Fall 2004

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Formal SIMS course description
Course Outline (this page)



A. Information in the economy

(A)1. Introduction

D. M. Lamberton, "Introduction: 'Threatened Wreckage' or New Paradigm?" in The Economics of Communication and Information , Elger, 1996.

Hal R. Varian, "The Economics of Information Technology" (2001).  Available at

Hal. R. Varian.  "Markets for Information Goods", Available at

Arrow, Kenneth Joseph. Elements of the Economics of Information; Information and Increasing Returns. Nankang, Taipei, Taiwan: Institue of Economics, Acaemia Sinicia [1996].

F. Machlup, The Production and Distribution of Knowledge in the United States (Princeton, 1962, 1972), Chapters 1,2,6.

Mattessich, R. "On the Nature of Information and Knowledge and the Interpretation in the Economic Sciences." Library Trends. V41(n4):200 (1993).

L. White, "The Sensible Economist's Guide to the Economics of Information" in The Economics of Information: Proceedings of the 20th Annual Symposium of the Rutgers GSLIS, Apr. 3, 1981. J. Varlejs, ed. (Jefferson, NC: McFarland, 1 982).

*M. Jussawalla, et al., eds., Information Technology and Global Interdependence. Westport, CT: Greenwood Press, 1989.

*V. Mosco & J. Wasko, eds., The Political Economy of Information. Madison: U. Wisc. Press, 1988.

*Jerry L Salvaggio, ed., The Information Society: Economic, Social, and Structural Essues (Hillsdale, NJ: Larence Erlbaum Associates, 1989).

(A)2. Economic, occupational and industrial structure

M. Castells & Yuko Aoyama, "Paths toward the informational society: Employment structure in G-7 countries, 1920-90. International Labour Review. 133:5-33 (1994).

H.-J. Engelbrecht, "A comparison and critical assessment of Porat and Rubin's INFOMATION ECONOMY and Wallis and North's TRANACTION SECTOR," Inf. Econ. and Policy 9:271-290 (Dec. 1997).

S. Robinson, "Analyzing the Information Economy: Tools and Techniques," Inf. Proc. & Mgt. 22: 183-202 (1986).

M. R. Rubin, "The Secondary Information Sector: Its Meaning, Measurement, and Importance" in M. Jussawalla and D. M. Lamberton, eds., The Cost of Thinking: Information Economies of Ten Pacific Countries (Norwood, NJ: Ablex Publ. Corp., 1988).

Wolff, Edward N. "Productivity, Computerization and Skill Change," January 2002. Available at:  [follow link to "Working Papers"]

Elliot, A., Tong, R., Varian, H., Wallenberg, F.  2000.  "User Testing of the NAICS 2002 Classifications".  (Forthcoming)

M. U. Porat, Definition and Measurement, vol. 1 of The Information Economy (Govt. Printing Office, 1977); excerpt in M. R. Rubin, Information Economics and Policy in the U.S., (Littleton, CO: Libraries Unltd., 1 983)..

Schement, J.R. "Porat, Bell, and the Information Society Reconsidered: the Growth of Information Work in the Early Twentieth Century." Information Processing and Management. V26(n4): 449-465 (1990).

*Benziger, The Control Revolution (Harvard, 1986).

*William J. Drake, ed., The New Information Infrastructure; Strategies for US Policy. (New York: Twentieth Century Fund Press, 1995).

*Katz, Raul Luciano. The Information Society: an International Perspective. New York: Praeger, 1988.

*The Knowledge-based Economy. Paris: Organization for Economic Co-operation and Development, 1996.

*P. Strassmann, Information Payoff: the Transformation of Work in the Electronic Age (New York: Free Press, 1985).

*G. P. Sweeny, ed., Information and the Transformation of Society (New York: North-Holland and Elsevier, c. 1982).

(A)2.a. Background information on input-output analysis

W. Leontief, "Structure of World Production: Outline of a simple input-output formulation",  Amer. Economic Rev. 64: 823-834 (December 1974). The classic article, now available through JSTOR or at:

W. Leontief, "Structure of the world economy" (Lecture to the memory of Alfred Nobel, December 11, 1973. From Nobel Lectures, Economic Sciences 1969-1980.) [Alternate source for the article above.]

U.S. Department of Commerce, Bureau of Economic Analysis, "Wassily Leontief and his Contributions to Economic Accounting," Survey of Current Business, March 1999. (Tribute prepared by J. S. Landefeld & S. H. McCulla)  Available at:

(A)3. Information as a factor of production

E. E. Bailey &. A. F. Friedlaender, "Market Structure and Multiproduct Industries," Jour. Econ. Literature 20: 1024-48 (Sept. 1982).

R. M. Hayes & T. Erickson, "Added Value As a Function of Purchases of Information Services," The Information Society 1: 307-38 (1982)

Y. M. Braunstein, "Information as a Factor of Production: Substitutability and Productivity," The Information Society 3: 261-273 (1985)

Y. M. Braunstein, "Information Inputs and Outputs in Firms and Quasi-Firms" in M. Jussawalla, ed., The Cost of Thinking: Information Economies of Ten Pacific Countries (Ablex, 1987).  

B. Productivity in the Service Sector

W. J. Baumol, "Macroeconomics of Unbalanced Growth: The Anatomy of an Urban Crisis," Amer. Econ. Rev. 57: 415-426 (June 1967).

C. S. Bell, "Comment," & W. J. Baumol, "Comment," Amer. Econ. Rev. 58: 877-884 and 896-897 (September 1968).

W. J. Baumol & S. A. Batey Blackman, "Electronics, the Cost Disease, and the Operations of Libraries," Jour. Amer. Soc. for Inf. Sci. 34: 181-191 (1983).

Blinder, Alan,   "The Internet and the New Economy," (2000).  Available at:

Brynjolfsson, E.  Various papers on productivity paradox, esp.  "The Intangible Costs and Benefits of Computer Investments: Evidence from the Financial Markets."  Available at

Gordon, Robert, "Does the "New Economy" Measure up to the Great Inventions of the Past?" Journal of Economic Perspectives, vol.4, no.14 (Fall 2000), pp. 49-74.  Available at

W. J. Baumol, S. A. Batey Blackman & E. N. Wolff, "Unbalanced Growth Revisited: Asymptotic Stagnancy and New Evidence," Amer. Econ. Rev. 75: 806-817 (September 1985)

*W. J. Baumol & W. G. Bowen, The Performing Arts: The Economic Dilemma (New York: 1966)
C. Economies of Scale & Scope; Industry Structure

David S. Evans & James J. Heckman (1984) "A test for subadditivity of the cost function with an application to the Bell system," American Economic Review, 615-623. With Erratum in 1986 American Economic Review, 856-858.

Yale M. Braunstein & Lawrence B. Pulley, "Economies of Scale and Scope in Telephony: Applying the Composite Cost Function to Bell System Data,"  in D. Lamberton, ed.,  Communication and Trade: Essays in Honor of Meheroo Jussawalla (Cresskill, NJ: Hampton Press, 1998).

Richard E. Simnett, "Contestable Markets and Telecommunications," in M. A. Crew, ed., Deregulation and diversification of utilities (Kluwer Academic, 1989), p. 127-142.

Farrell, J., H.K. Monroe & G. Saloner, "The vertical organization of industry: systems competition versus component competition," Journal of Economics and Management Strategy 7(2): 143-182, 1998.

Lehr, W., Understanding vertical integration in the Internet,  EURO CPR'98.  

D. Pricing information products and services

Y. M. Braunstein, "An Economic Rationale for Page and Submission Charges by Academic Journals", Jour. Amer. Soc. Inf. Sci. 28(6):355-358 (1977); reprinted in KEY PAPERS.

Chuang, J. &  M. Sirbu, "Optimal Bundling Strategy for Digital Information Goods: Network Delivery of Articles and Subscriptions." Information Economics and Policy 11(2):147-176 (1999).  (Abstract in reader; full text available at:

H. Varian & A. Acquisti, "Conditioning Prices on Purchase History."  Available at:

Yannis Bakos & E. Bryjolfsson,  (January 2000) "Bundling and Competition on the Internet: Aggregation Strategies for Information Goods," Marketing Science, Vol. 19, No. 1, pp. 63-82. Available at (abstract) and (complete paper).

Bakos, Y. and Brynjolfsson, E. (December 1999) "Bundling Information Goods: Pricing, Profits and Efficiency," Management Science, Vol. 45, No. 12, pp. 1613-1630. Available at (abstract) and  (complete paper).

Domenico Ferrari & Luca Delgrossi, "Charging for QoS," IEEE/IFIP IWQOS '98 keynote paper, Napa, CA, May 1998. Original  versions available at:  (postscript) or (MS Word)

Hal R. Varian, "Versioning Information Goods", available at:

Hal  R. Varian,  "Verisioning: the Smart Way to Sell Information", Harvard Business Review, December 1998.

*H. M. Kibirige, The Information Dilemma: a Critical Analysis of Information Pricing and the Fees Controversy (Westport, CT: Greenwood Press, 1983).

Paul Krugman, "What Price Fairness?" New York Times, October 4, 2000. (Dynamic pricing at

(Also see the Lommerud & Sorgard paper in Section K.)

 (D)1. Information costs and benefits

F. Machlup, "Uses, Value, and Benefits of Knowledge" in D. W. King,, Key Papers in the Economics of Information (White Plains: Knowledge Ind. Publ., 1983).

W. J. Baumol & J. A. Ordover, "Private Financing of Information Transfer: On the Theory and Execution" in KEY PAPERS.

Y. M. Braunstein, "Costs and Benefits of Library Information: The User Point of View" in KEY PAPERS.

W. D. Penniman, "Networking and Information Services: Prospects and Pitfalls" in R. M. Mason & John E. Creps, Jr., Information Services: Economics, Management, and Technology (Boulder: Westview Press, 1981).

E. Network Issues I: Externalities and Access

Koichiro Hayashi, "From Network Externalities to Interconnection: The Changing Nature of Networks and Economy," in The Economics of Information Networks, edited by Cristiano Antonelli, 1992.

S.J. Liebowitz & Stephen E. Margolis (1994) "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, 133-150.

Nicholas Economides, "The Economics of Networks," available at:  (Try to ignore the awful sound effects.)

S.J. Liebowitz & Stephen E. Margolis (1995) "Are Network Externalities a New Source of Market Failure?" Research in Law and EconomicsAvailable at:

Luis Cabral, David Salant & Glenn Woroch, "Monopoly Pricing with Network Externalities," International Journal of Industrial Organization (1997).

N. Curien & M. Gensollen, "Network Externality: Its Impact on Growth and Pricing of the Telephone service," in p. 189-214.

Paul A. David, "Information Network Economics: Externalities, Innovations and Evolution," in The Economics of Information Networks, edited by Cristiano Antonelli, 1992.

Eli M. Noam, "A theory for the Instability of Public Telecommunications Systems," in Cristiano Antonelli, ed., The Economics of Information Networks  (North-Holland, 1992). 

F. Network Issues II: Technical Standards

P. Drahos & I. Maher, "Innovation, competition, standards and intellectual property: policy perspectives from economics and law," Inf. Economics & Policy 16(1): 1-11 (March 2004).  [This is the introductory article to a special issue with the same title.  Several of the other articles are also very interesting.]

S. Besen & J.  Farrell, "Choosing How to Compete: Strategies and Tactics in Standardization," Jour. of Econ. Perspectives 8(2):117-131 (1994)

S. Besen & G. Saloner, "The Economics of Telecommunications Standards," in R. Crandall and K. Flamm, ed., Changing the Rules (Brookings, 1989).

Yale Braunstein and Larry White (1985) "Setting technical compatibility standards: and economic analysis," The Antitrust Bulletin, 30, 337-355.

J. Farrell & M. Katz, "The Effects of Antitrust and Intellectual Property Law on Compatibility and Innovation," Antitrust Bulletin 43:609-650 (1998).

Stanley Besen and Garth Saloner, "Compatibility standards and the market for telecommunications services," in R. Crandall and K. Flamm, ed., Changing the Rules (Brookings, 1989).

Paul A. David, "Some new standard for the economics of standardization in the information age," in p. 207-239.

Paul A. David, "Clio and the Economics of QWERTY," AEA Papers and Proceedings May 1985, 332-337.

Paul A. David & W. Edward Steinmueller (1994) "Economics of compatibility standards and competition in telecommunication networks," Information Economics and Policy , 217-241.

Joe Farrell & Garth Saloner, "Competition, compatibility and standards: the economic of horses, penguins and lemmings," in Product Standardization and Competitive Strategy, edited by H. Gabe., 1987.

S.J. Liebowitz & Stephen E. Margolis (1995) "Path Dependence, Lock-In and History," Journal of Law, Economics and Organization 11. 205-226.

Glynn S. Lunney (1990) "Atari Games v Nintendo: Does a closed system violate the antitrust laws?" High Technology Law Journal, 29-70.    

G. Economics of the Internet

N. Kaminer & Y. Braunstein, “Bibliometric Analysis of the Impact of Internet Use on Scholarly Productivity”, Jour.  Amer.  Soc.  Inf.  Sci., 49(8):720-730 (June 1998).

Eli Noam, "The Impending Doom of Common Carriage," (Aspen Institute, 1993). [Something to think about: Is this paper about trends in telecommunications, in the media, and/or about the Internet?]

Jeffrey K. MacKie-Mason & Hal R. Varian, (April 1993). "Pricing the Internet," available at:

Jeffrey K. MacKie-Mason & Hal R. Varian, (1993). "Some economics of the Internet," available at:

Andrew Odlyzko, "Internet pricing and the history of communications," Computer Networks 36 (2001), pp. 493-517. Also in Internet Services, Lee McKnight and John Wroclawski, eds., MIT Press, 2001.  Follow links at

Carl Shapiro  on software markets, Microsoft, etc. See:

Hal R. Varian, "Estimating the Demand for Bandwidth",

Hal Varian and  Jeff MacKie-Mason. Usage Pricing FAQs [PDF],  Written for WWW '94  (Chicago). Available at:

Jonathan Blake and Lee Tiedrich (1995) "The National Information Infrastructure Initiative and the Emergence of the Electronic Highway," Federal Communications Law Journal 46,

Gerald R. Faulhaber, "Pricing the Net: What Economists Do," paper for the Stanford Mini-Conference On Data Network Pricing, March 1995, 11 pgs.

Rob Frieden, "Dialing for Dollars: Will the FCC Regulate Internet Telephony?" Rutgers Computer & Tech. L.J. 23:47 (1997)

* Lee W. McKnight & Joseph P. Bailey, ed. Internet economics.   (Cambridge, Mass. : MIT Press, c1997.)   Available at: 

H. Information Asymmetries & Market Failures

George A. Akerlof, "Behavioal Macroeconomics and Macroeconomic Behavior," Amer. Economic Rev. 92:411-33 (June 2002).

George A. Akerlof, "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," Quarterly Jour. of Economics 83: 353-74 (August 1969).

Michael Spence, "Signalling in Retrospect and the Informational Structure of Markets," Amer. Economic Rev. 92:434-59 (June 2002).

A. Michael Spence, "Job Market Signaling," Quarterly Jour. of Economics 87: 355-74 (August 1973).

Joseph E. Stiglitz, "Information and the Change in the Paradigm in Economics," Amer. Economic Rev. 92:460-501 (June 2002).

Joseph E. Stiglitz, "Equilibrium in Product Markets with Imperfect Information," Amer. Economic Rev. 69:339-45 (Papers and Proceedings Issue, May 1979).

 Paul Krugman, "Harvest of Lemons," New York Times, October 14, 2001.  

I. Ownership of information: property rights from the economist's view

(I)1. General--readings on Coase's theorem

R. H. Coase, "The Problem of Social Cost," Jour. of Law and Economics 3: 1 (1960). [Good, brief discussions are in: "School's Brief: Of bees and lighthouses" The Economist (Feb. 23, 1991), pp. 72-73 and in The Economist, Feb. 17, 1996, p.67, which I quote here.]

Hal R. Varian ``Markets for Public Goods?'' Critical Review, 7(4): 539--557 (1994).  [This is a rejoinder to Coase's lighthouse paper]

J. Hirshleifer, Price Theory and Applications (Prentice-Hall, 1975), pp. 449-454.

Mark MacCallum, "Efficient at What?"  (1997 discussion paper of the Ministry of Justice, New Zealand.  Available at:  .  [ Part two has a good discussion of what MacCallum describes as the "bargaining-and-efficiency" version and the "neutrality" version of Coase's Theorem.  These are roughly equivalent to what I call Coase's first and second conjectures. ]

Mathematical Restatement of Coase’s Theorem (with apologies to Baumol and Oates). Notes available at:

*Y. Barzel, Economic Analysis of Property Rights. (Cambridge: Cambridge Univ. Press, 1989).

(I)2. Property rights in information

S. M. Besen & L. J. Raskind, "An Introduction to the Law and Economics of Intellectual Property," Jour. of Econ. Perspectives 3:3-27 (Winter 1991).

Y. M. Braunstein, et. al., "Economics of Property Rights as Applied to Computer Software and Data Bases," report for CONTU, 1977; excerpt in G. P. Bush & R. H. Dreyfuss, Technology and Copyright (Lomond, 1979).

R. Cooter &. T. Ulen, "Topics in the Economics of Property Law," Ch. 5 in Law and Economics (Addison-Wesley, 1997).

W. Landes & R. Posner, "An Economic Analysis of Copyright Law," Jour. of Legal Studies18:325 (1989).

I. E. Novos & M. Waldman, "The Effects of Increased Copyright Protection: An Analytic Approach," Jour. Pol. Econ. 92: 236 (1984).

P. Drahos and I. Maher, "Innovation, competition, standards and intellectual property law: policy perspectives from economics and law,"  Information Economics and Policy, Vol. 16 (No. 1),  pp. 1-11 (March 2004).  [In Section F of the course reader.]

S. Breyer, "The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies and Computer Programs," Harvard Law Review 84: 281 (1970).

N. L. Henry, "Copyright, Public Policy, and Information Technology," Science 183: 384-391 (Feb. 1, 1974).

D. Y. Peyton, "The Creation of Information: Property Rights and Subsidies" in J. Yurow,, Issues in Information Policy, NTIA, U.S. Dept. of Commerce, 1981 (NTIA-SP-80-9).

*W. Landes & R. Posner, The Economic Structure of Intellectual Property Law (Harvard Univ. Press, 2003)  (Review to be handed out in class or made available online.)

(I)3. Specific cases


Yale M. Braunstein, "Economic impact of database protection in developing countries and countries in transition," report for WIPO, 2002.  Available at (summary) and (complete paper).

Stephen M. Maurer, "Raw Knowledge: Protecting Technical Databases for Science & Industry" (1999).  Available at

Other areas

M. Mustonen, "Copyleft--the economics of Linux and other open source software," Inf. Economics & Policy 15(1): 99-121 (March 2003).

M. Jussawalla, et al., "Major Issues in Information Service Trade," in C. H. Lee and S. Naya, Trade and Investment in Services in the Asia-Pacific Region. Boulder, CO: Westview Press, 1988.

S. M. Besen, "Private Copying, Reproduction Costs, and the Supply of Intellectual Property," Information Economics and Policy 2: 5-22 (1986).

S. M. Besen, et. al., "Copyright Liability for Cable Television: Compulsory Licensing and the Coase Theorem," Jour. of Law and Economics 21:67-95 (1978).

R. K. Filer, "A Theoretical Analysis of the Impact of Artists' Resale Royalties Legislation," Jour. of Cultural Econ. :1-28 (Summer 1984).

T. Goetzl & S. A. Sutton, "Copyright and the Visual Artist's Display Right," Columbia Jour. of Art and the Law 9:15 (1985).

I. de Sola Pool & R. J. Solomon, "Intellectual Property and Transborder Data Flow," Stanford Jour. of Int'l Law 16: 113-39 (Summer 1980)

 Dean Baker, "Patent Medicine," The American Prospect, January 29, 2001

 "Patently problematic," The Economist, Sep. 12, 2002.  Available at:  

J. Telecommunications and Media Industries: Technology Basics and Economic Issues

Richard Arnott, Bruce Greenwald and Joseph E. Stiglitz, "Information and economic efficiency," Information Economics and Policy, 6:77-88 (1994).

R. Entman & S. Wildman, "Reconciling Economic and Non-Economic Perspectives on Media Policy: Transcending the 'Marketplace of Ideas'," Jour. Communications 42:5-19 (1992)

L. Johnson, Dealing with monopoly in international telephone service: a U.S. perspective, Information Economics and Policy 4:225-247 (1989/91).

Eli M. Noam (1987) "The Public Telecommunication Network," Journal of Communication, 30-48.

E.E. Zajak, "Is Telephone Service an Economic Right?" in Energy and Communications in Transition, edited by H. M. Trebing, MSU Public Utilities Studies, Michigan State University (1981), pp. 94-109.  

K. Regulation - Old and New

Harvey Averch and Leland L. Johnson (1962) "Behavior of the Firm under Regulatory Constraint," American Economic Review, 1052-1069.

Robert Crandall, "The changing US telephone market" and "From regulation to competition to divestiture," in B. G. Cole, ed.,  After the Breakup (Columbia University Press, 1991).

Gerald R. Faulhaber (1995) "Public policy in telecommunication: the third revolution," Information Economics and Policy, 251-282.

Gerald R. Faulhaber, "Policy-induced competition: the telecommunications experiments," Information Economics and Policy, Vol. 15 ( 1):  73-97 (March 2003).

Roger G. Noll & Bruce M. Owen, "The Anticompetitive Uses of Regulation: United States v AT&T," in p. 290-337.

Sam Peltzman, "The Economic Theory of Regulation after a Decade of Deregulation," Brookings Papers: Microeconomics 1989, 1-41.

Joe Farrell's musings on telecom deregulation:

Roger G. Noll, "The Future of Telecommunications Regulation," Social Science Working Paper 432, California Institute of Technology, July 1982.

Timothy J. Tardiff & William E. Taylor, "Telephone Company Performance Under Alternative Forms of Regulation in the US," National Economic Research Associates, September 1993, 44 pgs.

E.E. Zajac (1970) "A Geometric Treatment of Averch-Johnson?s Behavior of the Firm Model," American Economic Review, 117-120.