Saturday, October 27, 2007

Information: The Perfect Economic Good (Part 9)

Economic goods have many different meanings, but most agrees that an economic good is a commodity or service that can be utilized to satisfy human wants and that has exchange value. The specific meaning of an economic good takes on different meanings depending on its intended use. Similarly, the definition of information can slightly change depending on how it is used and despite its ubiquitous nature; can be seen as an economic good. Examples of information as an economic good can be seen with the analysis of the business of selling cataloged information via electronic databases and the public’s use of public libraries.

Economics may offer insights into the dynamic of information. (Coiera 216) and one thing that many companies strive for is to create a product that you can produced at no cost. Information is that product. What makes information the perfect economic good can be explained by Varian. As previously stated, Varian reveals the fact that that information has an extremely high fixed cost in compilation with a low (marginal) cost to reproduce the same information. The production of information, say in the form of creating a database, is characterized by significant economies of scale, high entry costs and a consequent tendency towards natural monopolies, in which specialists suppliers dominate specific sectors. So even though the start up cost or the cost of obtaining/producing the information may be extremely expensive, the cost to reproduce the information is non-existent. Meaning that company that sells the information can continue to obtain revenue from the same information without accruing any additional marginal cost. Therefore, creating the perfect economic good.

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