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The Web Economy: Goods, Users, Models and Policies Michalis Vafopoulos 05/12/2011

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The Web Economy: Goods, Users, Models and Policies Michalis Vafopoulos 05/12/2011 The Web economy: goods, users, models and policies Michalis Vafopoulos 05/12/2011 Abstract Web emerged as an antidote to the rapidly increasing quantity of accumulated knowledge and become successful because it facilitates massive participation and communication with minimum costs. Today, its enormous impact, scale and dynamism in time and space make very difficult (and sometimes impossible) to measure and anticipate the effects in human society. In addition to that, we demand from the Web to be fast, secure, reliable, all-inclusive and trustworthy in any transaction. The scope of the present article is to review a part of the Web economy literature that will help us to identify its major participants and their functions. The goal is to understand how the Web economy differs from the traditional setting and what implications have these differences. Secondarily, we attempt to establish a minimal common understanding about the incentives and properties of the Web economy. In this direction the concept of Web Goods and a new classification of Web Users are introduced and analyzed This article, is not, by any means, a thorough review of the economic literature related to the Web. We focus only on its relevant part that models the Web as a standalone economic artifact with native functionality and processes. WSSC: "webscience.org/2010/E.1 Economics and Business" 1 Table of Contents Abstract .................................................................................................................................................... 1 1. Introduction ..................................................................................................................................... 4 1.1. The Web in short ......................................................................................................................... 4 1.2. Web and economic research ..................................................................................................... 5 1.3. The Web Science perspective .................................................................................................... 5 1.4. Studying goods, users, models and policies in the Web ecosystem ................................... 7 2. Goods in the Web ............................................................................................................................ 9 2.1. Data, information, knowledge ................................................................................................ 10 2.2. Information goods ..................................................................................................................... 11 2.3. Knowledge goods ....................................................................................................................... 12 2.4. Digital goods ............................................................................................................................... 13 2.4.1. Introduction ............................................................................................................................. 13 2.4.2. The fundamental characteristics of digital goods ........................................................... 13 2.5. Networks ...................................................................................................................................... 14 2.5.1. The core of network modeling ............................................................................................. 15 2.6. Network goods ............................................................................................................................ 15 2.6.1. Network externalities and effects ........................................................................................ 16 2.6.2. The origins of network externalities .................................................................................. 16 2.6.3. Types of network effects ....................................................................................................... 17 2.6.4. Important issues related to network goods ....................................................................... 18 2.6.5. Network externalities in the Web ....................................................................................... 19 2.7. Web Goods .................................................................................................................................. 20 2.7.1. What is a Web Good and why is important ..................................................................... 20 2.7.2. The basic categories of Web Goods .................................................................................... 21 2.7.3. Differences between Web Goods and digital goods ........................................................ 22 2.7.4. Web Goods as commodities ................................................................................................. 23 2.8. Search and experience goods and the Web .......................................................................... 24 3. Users ................................................................................................................................................ 25 3.1. A classification of Web Users .................................................................................................. 25 3.2. The core functions of the Web Economy .............................................................................. 26 4. Consumption and Production in the Web ............................................................................... 28 2 4.1. Introduction ................................................................................................................................ 28 4.2. Consumption .............................................................................................................................. 28 4.2.1. More energetic and connected consumption .................................................................... 29 4.2.2. Consumer coordination at large in the Web: the Amazon co-purchase network ... 29 4.2.3. Personal data abuse and regulation challenges ............................................................... 31 4.3. Joint consumption of information and advertisements in massive scale ...................... 32 4.4. Moving the borders between production and consumption ............................................ 32 5. Production ...................................................................................................................................... 33 5.1.1. Inputs: information and knowledge reloaded .................................................................. 34 5.1.2. Incentives: from property to commons ............................................................................. 34 5.1.3. Peer Production: decentralized inter-creativity outside the classic market .............. 35 5.1.4. From mass to networked media .......................................................................................... 36 6. Economic modeling of Web Goods ........................................................................................... 36 6.1. Advertising in the Web ............................................................................................................. 37 6.2. The Stegeman model ................................................................................................................. 37 6.2.1. Assumptions ............................................................................................................................ 38 6.2.2. Editors and Navigators ......................................................................................................... 39 6.2.3. Equilibrium ............................................................................................................................. 40 6.3. The KKPS model ....................................................................................................................... 41 6.3.1. Assumptions ............................................................................................................................ 42 6.3.2. Equilibrium ............................................................................................................................. 43 6.4. The Katona-Sarvary model ..................................................................................................... 44 6.4.1. Assumptions ............................................................................................................................ 45 6.4.2. Extensions of the basic model .............................................................................................. 48 6.4.3. Results ....................................................................................................................................... 49 6.5. The Dellarocas-Katona-Rand model ..................................................................................... 50 6.5.1. Assumptions ............................................................................................................................ 50 6.6. Results .......................................................................................................................................... 51 7. Market regulation and antitrust issues .................................................................................... 52 7.1. Antitrust issues in the Search Engine market: the Pollock model .................................
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