微觀經濟學Microeconomics英文課件 35 Information Technology

ChapterThirty-FiveInformationTechnologyInformationTechnologiesThecrucialideasare:ComplementarityNetworkexternalityInformationTechnologies;

ComplementarityDefinition:CommodityAcomplementscommodityBifmoreofcommodityAincreasesthevalueofanextraunitofcommodityB.Moresoftwareincreasesthevalueofacomputer.Moreroadsincreasethevalueofacar.InformationTechnologies;

NetworkExternalityDefinition:Acommodityhasapositive(negative)networkexternalityiftheutilitytoaconsumerofthatcommodityincreases(decreases)asmorepeoplealsoconsumethecommodity.Emailgivesmoreutilitytoanyoneuserifmoreotherpeopleuseemail.Ahighwaygiveslessutilitytoanyoneuserasmorepeopleuseit(congestion).ComplementarityInformationtechnologieshaveincreasedgreatlythecomplementaritiesbetweencommodities.Computersandoperatingsystems(OS).DVDplayersandDVDdisks.WiFisitesandlaptopcomputers.Cellphonesandcellphonetowers.ComplementarityHowshouldafirmbehavewhenitproducesacommoditythatcomplementsanothercommodity?Theproblemis:Whenyoumakemoreofyourproduct(commodityA)youincreasethevalueoffirmB’sproduct(commodityB).CanyougetforyourselfsomeofgainyoucreateforfirmB?ComplementarityAnobviousstrategyisforfirmsAandBtocooperatesomewhatwitheachother.MicrosoftreleasespartofitsOStofirmsmakingsoftwarethatrunsunderitsOS.DVDmanufacturersagreeuponastandardformatfortheirdisks.ComplementarityThepriceofacomputerispC.ThepriceoftheOSispOS.ThequantitiesdemandedofcomputersandtheOSdependsuponpC+pOS,notjustpCorjustpOS.ComplementarityThepriceofacomputerispC.ThepriceoftheOSispOS.ThequantitiesdemandedofcomputersandtheOSdependsuponpC+pOS,notjustpCorjustpOS.Supposethecomputerandsoftwarefirms’marginalproductioncostsarezero.FixedcostsareFCandFOS.ComplementaritySupposethefirmsdonotcollude.Thecomputerfirm’sproblemis:choosepCtomaximize

pCD(pC+pOS)–FC.TheOSfirm’sproblemis:

choosepOStomaximize

pOSD(pC+pOS)–FOS.ComplementaritySupposethefirmsdonotcollude.Thecomputerfirm’sproblemis:choosepCtomaximize

pCD(pC+pOS)–FC.TheOSfirm’sproblemis:

choosepOStomaximize

pOSD(pC+pOS)–FOS.AssumeD(pC+pOS)=a–b(pC+pOS).ComplementarityThecomputerfirm’sproblemis:choosepCtomaximize

pC(a–b(pC+pOS))–FC.TheOSfirm’sproblemis:

choosepOStomaximize

pOS(a–b(pC+pOS))–FOS.ComplementarityChoosepCtomaximize

pC(a–b(pC+pOS))–FC

pC=(a–bpOS)/2b.(C)ChoosepOStomaximize

pOS(a–b(pC+pOS))–FOS

pOS=(a–bpC)/2b.(OS)ComplementarityChoosepCtomaximize

pC(a–b(pC+pOS))–FC

pC=(a–bpOS)/2b.(C)ChoosepOStomaximize

pOS(a–b(pC+pOS))–FOS

pOS=(a–bpC)/2b.(OS)ANEisapair(p*C,p*OS)solving(C)and(OS).ComplementarityChoosepCtomaximize

pC(a–b(pC+pOS))–FC

pC=(a–bpOS)/2b.(C)ChoosepOStomaximize

pOS(a–b(pC+pOS))–FOS

pOS=(a–bpC)/2b.(OS)ANEisapair(p*C,p*OS)solving(C)and(OS).p*C=p*OS=a/3b.Complementarityp*C=p*OS=a/3b.WhenthefirmsdonotcooperatethepriceofacomputerwithanOSis

p*C+p*OS=2a/3b

andthequantitiesdemandedofcomputersandOSare

q*C+q*OS=a-b×2a/3b=a/3.ComplementarityWhatifthefirmsmerge?ThenthenewfirmbundlesacomputerandanoperatingsystemandsellsthebundleatapricepB.Thefirm’sproblemistochoosepBtomaximize

pBD(pB)–FB=pB(a–bpB)–FB.ComplementarityWhatifthefirmsmerge?ThenthenewfirmbundlesacomputerandanoperatingsystemandsellsthebundleatapricepB.Thefirm’sproblemistochoosepBtomaximize

pBD(pB)–FB=pB(a–bpB)–FB.Solutionisp*B=a/2b<2a/3b.ComplementarityWhenthefirmsmerge(orfullycooperate)thepriceofacomputerandanOSis

p*B=a/2b<2a/3b

andthequantitydemandedofbundledcomputersandOSis

q*B=a-b×a/2b=a/2>a/3.ComplementarityWhenthefirmsmerge(orfullycooperate)thepriceofacomputerandanOSis

p*B=a/2b<2a/3b

andthequantitydemandedofbundledcomputersandOSis

q*B=a-b×a/2b=a/2>a/3.ThemergedfirmsuppliesmorecomputersandOSatalowerpricethandothecompetingfirms.Why?ComplementarityThenoncooperativefirmsignoretheexternalbenefit(complementarity)eachcreatesfortheother.Soeachundersuppliesthemarket,causingahighermarketprice.Theseexternalitiesarefullyinternalizedinthemergedfirm,inducingittosupplymorecomputersandOSandtherebycausealowermarketprice.ComplementarityMoretypicalcooperationconsistsofcontractsbetweencomponentmanufacturersandanassemblerofafinalproduct.Examplesare:Carcomponentsandacarassembler.AcomputerassemblerandmanufacturersofCPUs,harddrives,memorychips,etc.ComplementarityAlternativesinclude:Revenue-sharing.Twofirmssharetherevenuefromthefinalproductmadeupfromthetwofirms’components.Licensing.Letfirmsmakingcomplementstoyourproductuseyourtechnologyforalowfeesotheymakelargequantitiesofcomplements,therebyincreasingthevalueofyourproducttoconsumers.InformationTechnologies;

Lock-InStrongcomplementaritiesornetworkexternalitiesmakeswitchingfromonetechnologytoanotherverycostly.Thisiscalledlock-in.E.g.,IntheUSA,itiscostlytoswitchfromspeakingEnglishtospeakingFrench.Howdomarketsoperatewhenthereareswitchingcostsornetworkexternalities?Competition&SwitchingCostsProducer’scostpermonthofprovidinganetworkserviceiscpercustomer.Customer’sswitchingcostiss.Produceroffersaonemonthdiscount,d.Rateofinterestisr.Competition&SwitchingCostsAllproducerssetthesamenondiscountedpriceofppermonth.Whenisswitchingproducersrationalforacustomer?Competition&SwitchingCostsConsumer’scostofnotswitchingisCompetition&SwitchingCostsConsumer’scostofnotswitchingis

Consumer’scostfromswitchingisCompetition&SwitchingCostsConsumer’scostofnotswitchingis

Consumer’scostfromswitchingis

ConsumershouldswitchifCompetition&SwitchingCostsConsumer’scostofnotswitchingis

Consumer’scostfromswitchingis

Consumershouldswitchif

i.e.ifCompetition&SwitchingCostsConsumershouldswitchifProducercompetitionwillensureatamarketequilibriumthatcustomersareindifferentbetweenswitchingornot

I.e.,theequilibriumvalueofthediscountonlyjustmakesitworthwhileforthecustomertoswitch.Competition&SwitchingCostsWithd=s,thepresent-valueoftheproducer’sprofitsisCompetition&SwitchingCostsAtequilibriumthepresent-valueoftheproducer’sprofitiszero.

Theproducer’spriceisitsmarginalcostplusamarkupthatisafractionoftheconsumer’sswitchingcost.Competition&SwitchingCostsAtequilibriumthepresent-valueoftheproducer’sprofitiszero.

Theproducer’spriceisitsmarginalcostplusamarkupthatisafractionoftheconsumer’sswitchingcost.IfadvertisingreducesthemarginalcostofservicingaconsumerbyathenCompetition&SwitchingCostsAtequilibriumthepresent-valueoftheproducer’sprofitiszero.

Theproducer’spriceisitsmarginalcostplusamarkupthatisafractionoftheconsumer’sswitchingcost.IfadvertisingreducesthemarginalcostofservicingaconsumerbyathenCompetition&NetworkExternalitiesIndividuals1,…,1000.Eachcanbuyoneunitofagood,providinganetworkexternality.Personvvaluesaunitofthegoodatnv,wherenisthenumberofpersonswhobuythegood.Competition&NetworkExternalitiesIndividuals1,…,1000.Eachcanbuyoneunitofagoodprovidinganetworkexternality.Personvvaluesaunitofthegoodatnv,wherenisthenumberofpersonswhobuythegood.Atapricep,whatisthequantitydemandedofthegood?Competition&NetworkExternalitiesIfvisthemarginalbuyer,valuingthegoodatnv=p,thenallbuyersv’>vvaluethegoodmore,andsobuyit.Quantitydemandedisn=1000-v.So inversedemandisp=n(1000-n).Competition&NetworkExternalities01000nWillingness-to-pay

p=n(1000-n)DemandCurveCompetition&NetworkExternalitiesSupposeallsuppliershavethesamemarginalproductioncost,c.Competition&NetworkExternalities01000nDemandCurveSupplyCurvecWillingness-to-pay

p=n(1000-n)Competition&NetworkExternalitiesWhatarethemarketequilibria?Competition&NetworkExternalitiesWhatarethemarketequilibria?(a)Nobuyerbuys,nosellersupplies.Ifn=0,thenvaluenv=0forallbuyersv,sonobuyerbuys.Ifnobuyerbuys,thennosellersupplies.Competition&NetworkExternalities01000nDemandCurveSupplyCurvecWillingness-to-pay

p=n(1000-n)(a)Competition&NetworkExternalities01000nDemandCurveSupplyCurven’cWillingness-to-pay

p=n(1000-n)(a)Competition&NetworkExternalitiesWhatarethemarketequilibria?(b)Asmallnumber,n’,ofbuyersbuy.smalln’smallnetworkexternalityvaluen’vgoodisboughtonlybybuyerswithn’vc;i.e.,onlylargevv’=c/n’.Competition&NetworkExternalities01000nDemandCurveSupplyCurven’(b)n〞(c)(a)cWillingness-to-pay

p=n(1000-n)Competition&NetworkExternalitiesWhatarethemarketequilibria?(c)Alargenumber,n〞,ofbuyersbuy.Largen〞largenetworkexternalityvaluen〞vgoodisboughtonlybybuyerswithn’vc;i.e.,uptosmallvv〞=c/n〞.Competition&NetworkExternalities01000nDemandCurveSupplyCurven’(b)n〞(c)cWhichequilibriumislikelytooccur?Willingness-to-pay

p=n(1000-n)(a)Competition&NetworkExternalitiesSupposethemarketexpandswheneverwillingness-to-payexceedsmarginalproductioncost,c.Competition&NetworkExternalities01000nDemandCurveSupplyCurven’n〞cWhichequilibriumislikelytooccur?Willingness-to-pay

p=n(1000-n)Competition&NetworkExternalities01000nDemandCurveSupplyCurven’n〞cWhichequilibriumislikelytooccur?Willingness-to-pay

p=n(1000-n)UnstableCompetition&NetworkExternalities01000nDemandCurveSupplyCurven〞cWhichequilibriumislikelytooccur?Willingness-to-pay

p=n(1000-n)StableStableInformationEssentially,anythingthatcanbedigitizedisinformation.InformationGoods:books,database,magazines,movies,music,webpages.CostofproducinginformationInformationiscostlytoproducebutcheaptoreproduce.Ineconomicsterms,productionofaninformationgoodinvolveshighfixedcostbutlowmarginalcost.Therefore,wepriceinformationaccordingtoitsvalue,notitscost.ManagingIntellectualPropertySinceaninformationgoodcanbereproducedcheaply,otherscancopyitcheaply.Intellectualpropertyisveryimportant,butenforcementisanissue.e.g.,patent,copyright,trademarkWhenmanagingIP,thegoalshouldbetochoosethetermsandconditionsthatmaximizethevalueoftheIP,nottheonesthatmaximizetheprotection.Informationasan“ExperienceGood〞Agoodisanexperiencegoodifconsumersmustexperienceittovalueit.Informationisanexperiencegoodeverytimeit’sconsumed.Howdoyouknowtoday’sWallStreetJournalisworth$1?Mostmediaproducersovercometheexperiencetheexperiencegoodproblemthroughbrandingandreputation.

Informationasan“ExperienceGood〞(Cont’d)ThebrandnameofthewallStreetJournalisoneofitschiefasset,andtheJournalheavilyinbuildingareputationforaccuracy,timeliness,andrelevance.TheJournal’sonlineeditioncarriesoverthelookandfeeloftheprintversionextendingthesameauthority,brandidentity,andcustomerloyaltyfromtheprintproducttotheon-lineproduct.RightsManagementShouldagoodbesoldoutright,licensedforproductionbyothers,orrented?Howistheownershiprightofthegoodtobemanaged?RightsManagementSupposeproductioncostsarenegligible.Marketdemandisp(y).ThefirmwishestoRightsManagementRightsManagementRightsManagementRightsManagementTherightsownernowallowsafreetrialperiod.Thiscausesaconsumptionincrease;RightsManagementTherightsownernowallowsafreetrialperiod.Thiscausesaconsumptionincrease;lowersalesperconsumptionunitRightsManagementTherightsownernowallowsafreetrialperiod.Thiscausesaconsumptionincrease;lowersalesperconsumptionunit

increaseinvaluetoallusersincreaseinwillingness-to-pay;RightsManagementRightsManagementThefirm’sproblemisnowtoRightsManagementThefirm’sproblemisnowto

ThisproblemmusthavethesamesolutionasRightsManagementThefirm’sproblemisnowto

ThisproblemmusthavethesamesolutionasSoRightsManagementRightsManagementhigherprofitRightsManagementlowerprofitSharingIntellectualPropertyProducealotfordirectsales,oronlyalittleformultiplerentals?Sellatool,orrentit?Allowamovietobeshownonlyatatheatre,orsellonlytovideorentalstores,orsellonlybypay-per-view,orsellDVDsinretailstores?Whenissellingforrentalmoreprofitablethansellingforpersonaluseonly?SharingIntellectualPropertyFisthefixedcostofdesigningthegood.cistheconstantmarginalcostofcopyingthegood.p(y)isthemarketdemand.DirectsalesproblemistoSharingIntellectualPropertyFisthefixedcostofdesigningthegood.cistheconstantmarginalcostofcopyingthegood.p(y)isthemarketdemand.DirectsalesproblemistoSharingIntellectualPropertyIssellingforrentalmoreprofitable?Eachrentalunitisusedbyk>1consumers.Soyunitssoldx=kyconsumptionunits.SharingIntellectualPropertyIssellingforrentalmor