Tag: Notes for BIM

Transaction Costs and Information Costs Transaction costs are those costs associated with bringing buyers and sellers together.The costs associated with making exchange possible are transaction costs such as Travel cost Negotiation cost Property rights enforcement cost Cost of acquiring information Information costs In real world markets-even those that are highly competitive- there is a considerable […]

Cost of Producing Information One of the most fundamental features of information goods is that their cost of production is dominated by the “first-copy costs” i.e. it is very costly to produce the first copy and very cheap to produce subsequent copies. It is often said, for example, that the “first copy costs” are more […]

Types of Feedback In network externalities, two types of feedback generally known are of Positive feedback and  Negative feedback Positive feedback Positive feedback makes the strong get stronger and the weak get weaker, leading to extreme outcomes i.e. dominance of the marketplace by a single firm or technology. Positive feedback illustrates that success beget success […]

Cooperation and Compatibility Network economics and positive feedback make cooperation more important than ever. Most companies need to cooperate with others to establish standards and create a single network of compatible users. But as soon as the ink is dry on the standards agreement, these same companies shift gears and compete head to head for […]

Lock-In and Switching Costs Lock-in hinders customers from changing suppliers in response to changes in efficiency, and gives vendors profitable market power – over the same buyer in the case of switching costs (or brand loyalty), or over others with network effects. Switching costs are the costs that a consumer incurs as a result of […]

Informtaion Anything that can be digitized or encoded as a stream of bits (can be expressed in binary form) is information. Text, images, videos, music, digital goods, database, books, magazines, web pages etc. have entertainment and business value unique cost characteristics unique demand characteristics 1.4 FOUNDATIONS OF THE INFORMATION ECONOMY Communication Imparting or exchanging of […]