This course will examine the changes in business processes and organizations enabled by electronic commerce technologies and applications. Going beyond online ordering, electronic commerce will have far reaching impacts on how we produce and consume products, interact with firms and governments, and how businesses are organized and compete in the global marketplace. The purpose of this course is to develop a strategic understanding of the new electronic marketplace based on fundamental economics of the digital economy.

Texts for this course will consist of two required textbooks, two optional texts, and handouts to be distributed in class. Required textbooks are:

• The Economics of Electronic Commerce (EEC), by Soon-Yong Choi, Dale O. Stahl and Andrew B. Whinston, Macmillan Technical Publishing, 1997.

• Electronic Commerce: A Manager’s Guide (ECMG), by Ravi Kalakota and Andrew B. Whinston, Addison-Wesley, 1997.

Textbooks are to be purchased online via any electronic bookstore. A list of online bookstores can be found in search services such as Yahoo!, AltaVista and Infoseek.

Optional Textbooks

•Frontiers of Electronic Commerce (FEC), by Ravi Kalakota and Andrew B. Whinston, Addison-Wesley, 1996.

•Readings in Electronic Commerce (REC), by Ravi Kalakota and Andrew B. Whinston, Addison-Wesley, 1997.

Online slides and discussion questions.

Grades will depend on two assignments: digital product company project and discussion questions.

(1) Digital product company project: students will develop an online company that sells digital products and services during the semester. Organization and performance of these companies will determine your grade. More information will be distributed in class.

(2) Discussion questions: For each class, questions will be given a week in advance. Reading assignments will correspond to class topics and be used to prepare these questions. Grades will depend on your ability to answer and discuss these questions in class.

1. Digital Technologies As Smart Market Infrastructure

Readings:

EEC 1.1-1.2, 1.4

ECMG chapter 1. (Read chapters 2, 3, and 4 if you are not familiar with ISPs and WWW.)

FEC chapter 3: The Internet As a Network Infrastructure

Anderson, 1995, "The accidental superhighway," The Economist, July 1, 1995.

Bhimani, 1996, "Securing the commercial Internet," Communications of the ACM, June 1996.

2. Economics of the Digital Economy

Readings:

EEC 11.9

Strategy and the new economics of information, P. Evans and T. Wurster, Harvard

Business Review, Sept.-Oct. 1997, pp. 71-82.

New rules for the new economy, K. Kelly, Wired, Sept. 1997, pp. 140.

http://www.hotwired.com/wired/5.09/newrules.html

1. Changes in Business Organization: Smart Firms

Readings:

ECMG: chapter 10

EEC 1.3

REC chapter 7: Perils and pitfalls of practical Internet commerce

FEC chapter 11: Intraorganizational Electronic Commerce

2. Intranets and Extranets

Readings:

ECMG chapters 8, 11, 12.

FEC chapter 7: Consumer-Oriented Electronic Commerce

1. Digital Products and Smart Products

Readings:

EEC chapter 2: Characteristics of Digital Products and Processes

EEC 8.4: Pricing digital products

Economics professors’ amicus brief, in the case of lotus v. borland

Liebowitz and Margolis, 1994, "Network externality: an uncommon tragedy," Journal of Economic Perspectives.

2. Copyright Protection for Digital Products

Readings:

EEC chapter 5: Economic aspects of copyright protection

ECMG chapter 9: Electronic Commerce and Online Publishing

Samuelson, 1994, "Legally speaking: the NII intellectual property report," Communications of the ACM. http://www.eff.org/pub/GII_NII/Govt_docs/HTML/ipwg_samuelson.html

3. Product Differentiation, Pricing and the Use of Consumer Information

Readings:

EEC chapter 8

FEC chapter 16: Software agents

Odlyzko, 1996, "The bumpy road of electronic commerce." http://aace.virginia.edu/aace/conf/webnet.html

1. Quality, Reputation and Intermediaries

Readings:

EEC chapter 4, chapter 9

2. Advertising and Marketing in EC

Readings:

EEC 1.3: Market Characteristics of Electronic Commerce

EEC Chapter 6.

FEC chapter 13: Advertising and marketing on the Internet

3. Electronic Banking and Payment Systems

Readings:

EEC chapter 10: Electronic payment systems

ECMG chapter 6, chapter 7

FEC chapter 8: Electronic payment systems

4. Digital Currency and Effects

Readings:

EEC 10.5: Properties and specifications of digital currencies

EEC 10.7: Digital currency and governments

Federal Reserve Bank of San Franscisco, 1995, "A brief history of our nation's paper money," 1995 Annual Report. http://www.frbsf.org/frbsf/annualrpt/history.html

Greenspan, 1996, Remarks given to the U.S. Treasury Conference, Toward Electronic Money and Banking: The Role of Government.

5. Search Services

Readings:

EEC chapter 7: Consumers' search for information

FEC chapter 14: Consumer search and resource discovery

6. Electronic Markets and Auctions

Readings:

EEC 12.9: Market clearing mechanisms

REC chapter 13: Electronic markets

1. International Business and Trade

Readings:

EEC 11.8, 12.8.

2. Access, Taxation and Legal Issues

Readings:

EEC chapter 3: Internet infrastructure and pricing

EEC 11.1-7.

3. Market Structure and Government's Role in EC

Readings:

EEC 11.9: Antitrust and regulation policies

"Microsoft agrees to break up."

U.S. Department of Treasury, 1996, "Selected tax policy implications of global electronic commerce." ftp://ftp.fedworld.gov/pub/tel/internet.txt

4. The Future: Digital Processes for Businesses and Markets (The Virtual Economy)

Readings:

EEC chapter 12.1-7.

FEC chapter 20: Mobile and wireless computing fundamentals

Hamalainen and Whinston, 1996, "Electronic markets for learning: education brokerage on the Internet," Communications of the ACM, 39(6): 51-58.