nep-ict 2014-11-12 papers

on Information and Communication Technologies

Issue of 2014‒11‒12
two papers chosen by
Walter Frisch
Universität Wien

The Economics of Internet Media By Peitz, Martin; Reisinger, Markus
Search Costs, Information Exchange and Sales Concentration in the Digital Music Industry By Nestor Duch-Brown; Bertin Martens

By:	Peitz, Martin; Reisinger, Markus
Abstract:	We survey the economics literature on media as it applies to the Internet. The Internet is an important driver behind media convergence and connects information and communication technologies. While new Internet media share some properties with traditional media, several novel features have appeared: On the content side, aggregation by third parties that have no editorial policy and user-generated content have become increasingly important. On the advertiser side, fine-tuned tailoring and targeting of ads based on individual user characteristics are common features on many Internet media and social networks. On the user side, we observe increased possibilities of time-shifting, multi-homing, and active search. These changes have gone hand-in-hand with new players entering media markets, including search engines and Internet service providers. Some of these players face novel strategic considerations, such as how to present search results. In response to these changes, an emerging economics literature focuses on the allocative and welfare implications of this new media landscape. This paper is an attempt to organize these contributions and provide a selective account of novel economic mechanisms that shape market outcomes of Internet media. A large body of work has focused on the advertising part of the industry, while some studies also look at content provision and the interaction between the two.
Keywords:	Internet , media economics , digital media , targeting , news aggregation , search advertising , display advertising , two-sided markets
JEL:	L82 L86 M37 L13 D21 D22
Date:	2014
URL:	http://d.repec.org/n?u=RePEc:mnh:wpaper:37116&r=ict

Search Costs, Information Exchange and Sales Concentration in the Digital Music Industry

By:	Nestor Duch-Brown (European Commission - JRC - IPTS); Bertin Martens (European Commission - JRC - IPTS)
Abstract:	It is often assumed that consumers benefit from the internet because it offers a “long tail” with more variety of products to choose from. However, search costs may block the long tail effect and result in the dominance of superstars. This paper examines the variety hypothesis in the entire online market for digital music downloads in 17 countries over the period 2006-2011. First, we show that the entire distribution of legal music downloads is heavily skewed. Second, we hypothesise that a wide range of online information channels (sales and discovery platforms) play a role in this market. We find that the reduction of search costs implied by the generalisation of online information tools transforms demand as a result of changes in the dispersion of preferences. Ubiquitous and very popular discovery channels such as Facebook and iTunes tend to push consumers towards the superstars by shifting the demand curve but also towards the long-tail since they also generate rotations that promote niches. Conssequently, both the superstar and the long tail effects emerge even in mature digital markets.
Keywords:	digital markets, search costs, information, sales concentration, online markets
JEL:	C46 D12 L82
Date:	2014–11
URL:	http://d.repec.org/n?u=RePEc:ipt:decwpa:2014-09&r=ict

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