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Economic Analysis of the Digital Economy$
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Avi Goldfarb, Shane M. Greenstein, and Catherine E. Tucker

Print publication date: 2015

Print ISBN-13: 9780226206844

Published to Chicago Scholarship Online: September 2015

DOI: 10.7208/chicago/9780226206981.001.0001

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Modularity and the Evolution of the Internet

Modularity and the Evolution of the Internet

(p.21) 1 Modularity and the Evolution of the Internet
Economic Analysis of the Digital Economy

Timothy Simcoe

University of Chicago Press

This chapter offers an empirical case study of the Internet architecture from an economic viewpoint. Data collected from the two main Internet standard setting organizations, which are the Internet Engineering Task Force (IETF) and the World Wide Web Consortium (W3C), demonstrate the modularity of the Internet architecture, as well as the specialized division of labor that produces it. An analysis of citations to Internet standards provides evidence on the diffusion and commercial application of new Internet protocols. The author ties these observations together by arguing that modularity helps the Internet, and perhaps digital technology more broadly, to avoid long-run decreasing returns to investments in innovation by facilitating low-cost adaptation of a shared general-purpose technology to the demands of heterogeneous applications.

Keywords:   standards, coordination, modularity, internet, innovation, general purpose technology

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