Paper Body:

Information goods - from movies and music to software code and stock quotes - have supplanted industrial goods as the key drivers of world markets. Confronted by this New Economy, many instinctively react by searching for a corresponding New Economics to guide their business decisions. Executives charged with rolling out cutting-edge software products or on-line versions of their magazines are tempted to abandon the classic lessons of economics, and rely instead on an ever-changing roster of trends, buzzwords, and analogies that promise to guide strategy in the information age. 

In Information Rules by Shapiro and Varian, authors warn managers, "Ignore basic economic principles at your own risk. Technology changes. Economic laws do not." Understanding these laws and their relevance to information goods is critical when fashioning today's successful competitive strategies. Information Rules introduces and explains the economic concepts needed to navigate the evolving network economy.

In Information Rules touches on the characteristics of information as a "good" and discusses the challenges associated with selling this kind of intangible. Can you define what is an information good? Where is the line that separates information goods from other goods, and defines the limits of the information economy? 

The shortest answer the authors can give is that anything that can be digitized is an information good. A computer program, an image, or a music video are all examples of information goods. Offers that include a service component can also be an information good - where you interact with a computer program or a web page for example. Perhaps you want to call that an information service rather than an information good. The basic idea is that it does not have a material component.

The approach of Carl Shapiro's and Hal Varian's on how IT can influence on economics and development of society is much more narrow and considerably differs in smaller deep of prognosis concerning to perspectives of human civilization development as a whole. Generally, the book of these authors has a character of user manual on management problems in conditions of huge IT development.

In this historical and theoretical context, Hal Varian and Carl Shapiro have chosen to write a book on network economics that primarily summarizes research results and develops conceptual tools to examine industries where information technologies are applied. In chapter one (The Information Economy), the authors condense their argument. They propose that there are particular attributes of information goods that allow these goods to "rule" the network economy. 

These attributes are related to the creation of value of information to different consumers (information supply side) and to the "packaging" that allow information to be delivered to consumers (technology supply side). By utilizing the characteristics of information, the authors suggest that "information suppliers" such as software companies create value of information by utilizing differential pricing, intellectual property protection or branding strategies in a different way. "Technology suppliers" such as network operators can increase the value of their products by providing complementary components, creating high switching costs for customers and utilizing network effects provided by information technologies. Both authors postulate that these strategies might pose also threats to competition and innovation in the information sector. 

They further argue for an active role of governments in affirmatively financing, endorsing and adopting of technologies to speed their widespread use
The authors say that information goods from movies and music to software and stock quotes have supplanted industrial goods as the key drivers of world markets. Confronted by this New Economy, many instinctively react by searching for a corresponding New Economics to guide their business decisions. Executives charged with rolling out cutting-edge software products or on-line versions of their magazines are tempted to abandon the classic lessons of economics, and rely instead on an ever-changing roster of trends, buzzwords, and analogies that promise to guide strategy in the information age. 

Not our century, but an extremity of 1800-th years however is described. Hundred years back emerging of the telephone and transmission lines has determined of business transformation. Though the circumstances of this or that epoch can have unique features, the basic principles of exchange of the goods in free market economy remain constant. And the authors Carl Shapiro and Hal Varian are absolute sure about it.

They speak that certainly, the today's business world indefinitely differs from that, with what it was hundred years ago. However many modern managers are so keen on trees of technological changes, that the woods of depth economic forces, defining success and failure of business do not see behind them...

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