Market economics of e-commerce

Essay by jimsky May 2007

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IntroductionBasically goods divided into two types, which are tangible and intangible. One of the examples of intangible goods is information goods. An information goods is goods that could be digitized or transferred digitally. Information goods are different from any other goods. These goods could not survive in perfect competition market. It is needed monopolistic competition and oligopoly market structure to support it. One of the strategies in oligopoly to maximize the profit from information goods is price discrimination. The development of information and technology has added some value to support the firms which engage in price discrimination.

AnalysisIn the economic terms, product is reflected the goods and services. From physically of the goods it is divided into two which are tangible and intangible. Goods that tangible allowed the consumer to use or consume it physically like food or clothes. However, the intangible goods are untouchable. The consumers could not touch or consume it physically, but its existence allowed the consumer to enjoy its functions as a product.

The example of intangible good is information good.

1.Information GoodInformation goods are the good that could be delivered digitally and service where a substantial proportion of that service can be delivered digitally (Murdoch Economic of E-Commerce lecture 5, 2003). This explanation also supported by Varian who stated that information goods are anything that could be digitized (Varian, 1998). The examples of information goods are movie, music, etc. The information goods have unique characteristic as the economic goods which are:1.The cost for the first copy is high; however the cost for subsequent copy is next to nothing.

The first copy for information goods usually is very costly, because to create the first copy of information good might needed to do the research and development or need to consider some equipment in its...