The Economics of
Electronic Commerce

Essential Economics for Doing Business in the Electronic Marketplace

by

Review by Journal of Economic Literature:

"Any economist interested in doing research on the economics of the Internet will likely find it useful, even, perhaps, their best starting point...it was published in 1997...[but] the book's fundamental analysis remains surprisingly sound and current. This attests to the book's long-term value and interest for those interested in the intersection of the Internet and economics." - by William L. Goffe (JEL, March 2000, pp. 151-152, JEL 99-0249)

The Economics of Electronic Commerce. The Essential Economics of Doing Business in the Electronic Marketplace. By Soon-Yong Choi, Dale O. Stahl and Andrew B. Whinston, Macmillan Technical Publishing, 1997. Easy to read introduction to the electronic marketplace, its strategic implications for businesses, and policy issues. Used as a basic reading source for introductory electronic commerce courses in many business schools including MIT, Texas and LSU.

The Economics of Electronic Commerce offers an integrated overview of the electronic marketplace and the Internet Economy. Electronic commerce means many things to many people. But at its core, electronic commerce--or the digital economy, electronic marketplace, or Internet commerce--refers to an economic system where firms and consumers are aided by computers and networking technologies that enable an entirely new market.

In this newly defined world of business, it is vital to have an insightful understanding of the broad spectrum of issues affecting commercial uses of the Internet and the next-generation information infrastructure. While there is a considerable uncertainty about who will be the winners and what products and technological standards will dominate this new arena, the basic foundation for a totally unique competitive market has been laid and so has the stage for a fundamental market analysis using economics.

This book is not about how to use the Web or how to set up a Web page. It introduces readers to the underlying economic aspects of the electronic marketplace in order to provide them with an understanding of the fundamental implications of technological developments, business strategies and policies--laying the foundation for the development of radically new business models. This analytic foundation is most lacking in other books on electronic commerce. The Economics of Electronic Commerce, after two years of its publication, still delivers advanced, academic and essential insights into electronic commerce and the Internet-based economy.

Beginning and Preface

Table of Contents

Chapter 1 - Electronic Commerce and the Internet	Defines and overviews electronic commerce; summarizes current issues
Chapter 2 - Characteristics of Digital Products and Processes	Analyzes the characteristics of digital products and processes
Chapter 3 - Internet Infrastructure and Pricing	Explains Internet network infrastructure, convergence, pricing and policy options
Chapter 4 - Quality Uncertainty and Market Efficiency	Will lemons dominate the Internet marketplace?
Chapter 5 - Economic Aspects of Copyright Protection	Overviews the nature of digital copyright law
Chapter 6 - Signaling Quality and Product Information	Advertising and marketing strategies on the Internet
Chapter 7 - Consumers' Search for Information	Where and how do we find information about products?
Chapter 8 - Product Choices and Discriminatory Pricing	Evaluates product choices, uses of private consumer information and pricing strategies
Chapter 9 - Financial Intermediaries and Electronic Commerce	Reviews and previews the changing functions of intermediary service providers
Chapter 10 - Electronic Payment Systems	Electronic payment systems, their economic impacts and policy implications
Chapter 11 - Business and Policy Implications of Electronic Commerce	Evaluates current issues, government policies and research areas
Chapter 12 - A Look Ahead	Provides a road map for the digital economy of the 21st century

Highlights

• Provides an integrated microeconomic framework for understanding electronic commerce and maximizing its benefits
• Discusses the role of the Internet infrastructure and technologies in terms of economic, business and societal impacts
• Digital versus physical products--the economic implications
• Explains product choices and pricing strategies for the Internet
• Presents a clear overview of electronic payment systems and their uses
• Discusses online advertising, marketing and search activities in a broader context of the electronic marketplace
• Evaluates major policy issues including online taxation, digital copyright, privacy, convergence, regulation and monetary policies by relating technological choices to their impacts on markets and efficiencies

List of Selected Courses Using This Book as Primary or Secondary Textbook
A Partial List Generated by Internet Search

• Econ 698a Electronic Commerce, University of New Hampshire
• Economics (econ-139-01), University of California-Santa Cruz
• MGT 49a: Electronic Commerce and Virtual Organizations, Vanderbilt University
• The Economics of Electronic Commerce, National Taiwan University
• Designing and Managing Cyberventures, Copenhagen Business School, Denmark
• Internet Commerce and Consumer Marketing, Copenhagen Business School, Denmark
• Internet Economics and Business, MIT
• Electronic Commerce and Virtual Communities, Louisiana State University
• MGT 8359 - Advanced Topics in MIS, Villanova University
• Bijeenkomst 3: Informatie-en communicatiemarkten, University of Amsterdam, the Netherlands
• BSA 306 Electronic Commerce, University of Tasmania, Australia
• Reading Course in Electronic Commerce, MBA 898, University of Saskatchewan, Canada
• Globalization and the Information Society, Joint seminar among University of Michigan, American University and University of the Witwatersrand, South Africa
• Electronic Commerce (Accounting), Rutgers University
• Electronic Marketing (Marketing), Rutgers University
• Doctoral Seminar in Economics of Information Systems, University of Illinois at Chicago
• Digital Economy and Commerce, University of Texas at Austin
• Wirtschafts- und unternehmenspolitische Aspekte der Informations- und Kommunikationstechnologie, University of Augsburg, Germany

Who Should Read and Use This Book?

• Business Professionals and Managers. For those involved in the actual production, marketing, and distribution as well as for professionals doing business in the electronic marketplace, this book provides detailed analysis of strategic and market elements of electronic commerce.
• Entrepreneurs. Applying standard economic analyses to the electronic marketplace will lay the foundation for the development of radically new business models. The economic topics we explore are related to the basic aspects of doing business electronically and are relevant to anyone interested in entering the realm of electronic commerce.
• Teachers and Students. This book gives teachers and students a structured basis for both microeconomics and electronic commerce management/IS courses focusing on the electronic marketplace. As electronic commerce progresses towards a full-fledged marketplace, economic analysis will take on an increasingly greater importance in evaluating technologies, business strategies and public policies. This book provides sidebars for technical information and is supported by both print and Web-based teaching materials including sample lecture outlines, Web links for case studies, presentation slides and discussion questions (contact the authors for course materials).
• Researchers and Policy Makers. For researchers in telecommunications, computer science, economics, law, management, information systems, advertising and public policy, this book presents a structured overview of current issues and lays foundations for future research.
• Casual Readers and the General Public. For casual readers who are concerned with what the 21st century will bring, this book will explain the worldly ramifications of the digital technologies and offer an understanding of how the digital revolution will affect their everyday life. This book relies on minimum academic jargons, explains basic economic concepts in detail and with examples, and offers resources for further reading and Web exploration.

Selected Reviews

"The Economics of Electronic Commerce takes on the hard job of analyzing how the Web is changing many of the conventional business processes that have defined companies for decades...this is a worthwhile book for marketing and strategic planning executives who need to think about the infrastructure they must put into place." -- Electronic Business Today.

"The Economics of Electronic Commerce ... strips away all the marketing and journalistic hype surrounding the Internet and examines it from a purely rational perspective...useful to the business student or executive hoping to tap into the Internet's supposedly vast consumer reserves." -- Upside Books Review

"This book is the best of the group. It addresses the fundemental questions of electronic commerce and economics by introducing a very compelling framework to understand the degrees of electronic commerce (players, process, and product)." -- Cybermediary Bookstore)

"Excellent analytical and lucid tome applies standard microeconomic analysis to the underlying aspects of electronic commerce on the Internet, from the perspective of a global market... Establishes a foundation and framework for the development of new business enterprise models... This text should be a mandatory requirement for all MBAs, it foreshadows the new distributed global business and marketing environment." -- allECommerce

Publishing/Ordering Information

• Publisher: Macmillan Technical Publishing
• Hardbound, 626 pages
• Publishing Date: July 1, 1997
• ISBN: 1-57870-014-0
• List Price: $49.99
• Available at local bookstores and online bookstores or order The Economics of Electronic Commerce from Amazon.com.