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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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(p.1) Introduction
Economic Analysis of the Digital Economy

Avi Goldfarb

Shane M. Greenstein

Catherine E. Tucker

University of Chicago Press

Research on the economics of digitization studies how markets change when digitization leads to reproduction at zero cost and an abundance of digital data. Digital technology has led to a rapid decline in the cost of storage, computation, and transmission of data. As a consequence, economic activity is increasingly digital. The transformative nature of digital technology has implications for understanding economic activity, for consumer behavior, for competitive strategy, fornewfirmformation, and for determining policy. The introduction emphasizes the three key themes of the book’s chapters: Internet Supply and Demand, Economic Frictions and New Markets, andGovernment Policy. Each chapter is summarized and put into the context of the broader literature on the economics of digitization, providing a viewpoint on that literature. We do not view the economics of digitization as a new field. Instead, digitization research touches ona variety of fields. Research on the economics of digitization is distinguished by an emphasis on how digital technology and digital data interact with market outcomes. Specifically, economic settings transformed by digital data tend to have very low marginal costs of production and distribution, as well as lower transactions costs and market frictions, thereby raising numerous questions and issues.

Keywords:   digitization, information technology, technology policy, internet supply and demand, economic frictions

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