Can the Conventional Models Apply? The Microeconomics of the Information Revolution

Operating with incorrect assumptions concerning information firms and how they conduct commerce has significant public policy implications. One possible consequence is inappropriate anti-trust action (or inaction) by government regulators. Because the decision to enforce is essentially Boolean in nature and can have long-term impacts on the industry, it is important to base regulatory and other public policy decisions on appropriate models. This paper argues that there are importantly different microeconomic paradigms applicable to information-based commerce. These differences should be investigated in some depth to inform future policy decisions affecting information-based enterprises and economies based on their commerce. Such research may lead to significant improvements in our ability to make good public policy decisions on issues that will challenge us as our society adapts to the changes in commerce brought about by information technology.