Digital Economics: How Information Technology Has Transformed Business Thinking

Time was, if we wanted the latest ‘45, we had to walk into an actual music store, pick out a real live item, and pay with cold, hard cash. Now, much of what we buy is comprised of 1's and 0's that we pay for electronically and download onto our PCs. What does this mean for companies' pricing strategies and production units? When traditional goods like movies, books, and music are digitalized, economic arguments take a new turn and many public policies, from privacy to piracy, must be reexamined. That said, McKenzie concludes, "The advent of network and digital economics poses no threat to conventional microeconomic models of markets." Richard B. McKenzie is the Walter B. Gerken Professor of Enterprise and Society in the Graduate School of Management at the University of California, Irvine, where he teaches a course for MBA students on microeconomics for managers, managing organizational incentives, and digital economics. He is also a regular columnist for Investor's Business Daily.