The Digital Economy
Economics 222
Spring 2002



Professor Jean Shackelford
Coleman Hall 165


"a wealth of information creates a poverty of attention." ....Herbert Simon

Modeling the Digital Economy
Department of Commerce Website

Professor Jean Shackelford
OFFICE HOURS: W 9-12 , Others by appointment (Coleman 165)
ADDRESSES: e-mail:, phone: X- 73441

Requried Text: Linda Low. Economics of Information Technology and the Media. World Scientific, Singapore University Press 2000.

Course Objectives:

This course will develop and utilize economic principles to better understand and explain the expansion and integration of information and communications technologies into the US and global economies. It will provide an introduction to concepts and theories useful in analyzing economic aspects of the digital and information technology revolutions. While the course will review the interdisciplinary developments driving many of these changes, it will focus primarily on the economic aspects.


ASSIGNMENTS: January | February | March | April
Article Reviews and Other Writing Assignments (Guidelines)

Introduction-- January 17 - Introduction to the course--goals, objectives, assignments, grading,

January 22 - 29th - Part 1 The Economics of Information
Overview of IT and the Media - linking the information economy and the digital economy -Chapter 1 ( to pp.22)

January 31 - Basic Economic Concepts and Principles- Chapter 2

MINI PROJECT: Explore the links below and jot down pricing and advertising characteristics that you find in those sites. What other kinds of information is available? What kinds of goods and services are being sold? How is pricing accomplished? (How far can you get before you are asked for a credit card? [note: please don't give credit card information as part of this project assignment!]
Pricing Models on the WWW? What is out there? | Independent Booksellers | The Tattered Cover
Try to compare the prices of a book with a shopbot. Results? How about this shopbot - My Simon? What is Edge Gain up to?
Is there competitive pricing on airlines?, Travelocity, Orbitz, Best Fares
Construct a paragraph in which you report the results of your investigation.

February 5 - Market Structure and Competition - exploring the economic impact of the digital economy and the digital revolution Chapter 3

February 7 - Conclude Chapter 3 of Low Hal Varian's "Economics of Information Technology" or "High Technology Industries and Market Structure."with Groups preparing the following for class on Thursday, February 7th.

a. Prepare a summary of the main points of the sections in Varian dealing with the main issues in your section of the reading.
b. Outline some examples of each of these.
c. What are the relationships in these sections to the economic principles and theories in Low's Chapters 2 and 3?
d. Prepare a question on this topic for class discussion.
Group 1 - Price Discrimination: Carpenter, Decker, Housman, Graytock, Karlson, Walker, Young
Group 2 - Search, Bundling, Switching Costs and Lock-in's: Dodge Jacobson, Kassamali, Kocay, Walker
Group 3 - Supply Side Economies of Scale: Garcia-Tunon, Lang, Lloyd, Marino, Mayer, Wettergreen
Group 4 - Demand Side and Network Effects - Reynolds, Sanchez, Scheu, Tanana, Wright

February 12 - We will begin a discussion of the Free Software or Open Source Movement with the GNU Project

February 14 - Continue the examination of the Open Software movement by discussing Linux --reading the Cathedral and the Bazaar. Also read one article from the "popular or wired press" about Linux. Perhaps one of the articles at Wired on 'The Linux Effect'.

February 19- Begining to explore the Microsoft Monopoly case. Readings: "Comment on the Revised Proposed Final Judgement." Robert E. Litan, Roger G. Noll and William D. Nordhaus, January, 2002. (This is a 75 page report available for downloading by clicking in the box at the top of the page that begins NEW at this Bookings Institution Page

February 21 - Continue exploring the case against/proposed settlements of the Microsoft Monopoly Case (review one of the articles in this Washington Post archive) and the AOL/TimeWarner and Microsoft Oligopoly - "In AOL's Suit Against Microsoft, the Key Word is Access." Revies the Microsoft/DOJ time line from the Washington Post

Optional: "An Economists Guide to U.S. v. Microsoft" by Richard J. Gilbert and Michael L. Katz. Journal of Economic Perspectives, Volume 15, No 2, Spring 2001, pp. 25-44 (also on e-reserves)

February 26 - Conclude market structures discussion. Please read "Book World: Chipping Away" by Clive Thompson. We will begin Part II Players and Markets in IT and the Media - Institutions in the digital economy - IT and Media Markets (Computer Industry, Broadcast Industry, TV, Radio, Recording and Motion Pictures and Newspapers - Read Low Chatper 4, and A New Life for Networks in the 2/21/02 New York Times.

February 28 - IT Labour and Employment ­ read Low Chapter 6 and Wiring the Labor Market.on ereserves

Optional: Lawrence F. Katz - "Technological Change, Computerization, and Wage Structure." (PDF to download)

March 5 - INTERVIEW PROJECT on labor and the digital economy - project design for the Knowledge Economy and the impact on work and workers. (Possible interview questions.)

Examination, March 7

March 8-18 - Spring Break

March 19 - Review Exams, discuss work and productivity issues. Go over interview assignment.

March 21 - Productivity in the digital age (reading assignment handed out in class).

March 26 - Interview Project draft due. B2B and P2P, and B2C. Read Low, Chapter 7 (pages 163-181) and 8 pages (181-192) - Technology and the Market, Convergence and education - the MIT Opencourseware project

March 28 - The Digital Economy and the Music Industry - Napster and MP3 etc.
a. An Update on the Napster case
b. A new bill aimed at protecting copyright - Anti copy bill slams coders--from Wired
c. Technological and Social Drivers of Change in the Online Music Industry or Music in the Age of Free Distribution

April 2 - Napster, Property Rights, Copyright and the Digital Economy - continued

April 4 - The Digital Economy and Privacy Regulation, Encryption and Terrorism
a. "Cybercrime Dilemma: Is it Possible to guarantee both security and privacy?" by Michael O'Neil
b. "Europe to US: No privacy, no trade," by Simon Daves
c. "CDT's guide ot online privacy"
d. Low, pages 228-237

April 9 - Take a look at the articles linked in a PC Magazine series on Protecting your Privacy.

Here are some links where you can explore some privacy "tools." (Thanks to PC Mag, and S.Utke)

The Center for Democracy and Technology is an advocacy group that has links to "opt-out pages" for known tracking services.
Anoymose - has a free web based service hide the IP address and host name:
Pop-Up Stopper blocks popup windows.
Bugnosis lets you know about wegbugs.
Ad-Aware lets you know about spyware

April 11 - Part III Public Policy and the Global Economy. How does the digital economy affect economic policy-National Information Policy - IT and the Media in the Global Economy -
a. Low - Chapter 9 and 10
b. "Globalization of Information: Intellectual Property Law Implications," by Kim Nayyer

April 16 - Macroeconomic Policy and the Digital Economy - Silicon Valley's Spy Game from the New York times and sections of Martin Baily's Macroeconomics Implications of the New Economy.

April 18 - Issues in Media and Information Economics - Low, Chapter 11, and specific elements of the Digital Divide -Donna L. Hoffman and Thomas P. Novak - "The Growing Digital Divide: Implications for Open Research Agenda." (PDF to download)

April 23 - Cultures - the digital economy and development - Heather Hudson - "Extending Access to the Digital Economy to Developing Regions." (PDF to download) and The Next Economy - J. Bradford De Long and A. Michael Froomkin

April 25 and 30 Final Projects Presentations

May 7, 8:00 AM - Final Examination

Class Preparation:

Class periods will be devoted to presentation and informal discussion of the assigned readings and occasional projects. All assigned materials should be read before class. The readings and class discussion are essential to your participation in and the understanding of class discussions and presentations. You will be expected to participate each day.


The following criteria will be used for course evaluation:

Aspect of Course Points
Class Participation/Preparation and Attendance 20 percent
Article Reviews and Other Writing Assignments (Guidelines) 15 percent
 Projects 35 percent
 Examinations 30 percent
 Total 100 percent

Class Discussion/Preparation/Participation: (20%)

Includes daily preparation of assigned materials and reflection about material in reading assignments and participation in class discussions. (Make sure that you are have scanned theNew York Times for relevant articles and read all assigned articles.) You must be present in class to participate (see below for attendance expectations.)

Written Assignments: (50 percent)

Article Reviews and other Writing Assignments (15%)
Two page papers summarizing a key article. These reviews demonstrate your abiltiy to identify and correctly explain economic principles, theories, and concepts present in the article. In these reviews you should connect and apply the tools, principles, and topics from class discussion and readings to the article.
Project(s) (35%)

Examinations: (30%)

There will be two examinations during the course of the semester.

If you would like to discuss your written work or class participation, please feel free to stop in my office, (Coleman 165) to discuss your progress.

Class Policies

Attendance. (standards for your class participation grade) Please arrange your appointments for job interviews or participation in sports events at other times than class meetings. Since participation is a large part of evaluation, class absences will be reflected in your grade for the course.

In addition to the above, you may use the following as an attendance guide which will be part of my assessing "Class Discussion":

4.0 Perfect attendance. Always well prepared and contributes actively in most classes.
3.0 90% attendance. Almost always well prepared and usually contributes actively.
2.0 80% attendance. Usually prepared and contributes actively to about half of the classes.
1.0 At least 50% attendance. Only prepared about half of the time. Contributes actively about 20 % of the time.
0.0 Attends occasionally. Poor preparation.

Academic Responsibility. Students in this course, as in all others, will be held to the highest standards of academic responsibility. Bucknell has a clearly published policy on academic responsibility, which can be found in the section on regulations in your Student Handbook, in the Catalog, and on the web:

"Bucknell students are responsible for the preparation and presentation of work representing their own efforts. Acceptance of this responsibility is essential to the educational process and must be considered as an expression of mutual trust, the foundation upon which creative scholarship rests. Students are directed to use great care when preparing all written work and to acknowledge fully the source of all ideas and language other than their own." (Bucknell Catalog, 2001-02, p. 284).

Possible readings or articles to review.

CTNet - The end of the begining of the digital economy

John Haltwinger and Ron Jarmin - "Measuring the Digital Economy" (PDF to download)

Brent Moulton - "GDP and the Digital Economy: Keeping up with the Changes" (PDF to download)

Paul David - "Understanding Digital Technology"s Evolution and the Path of Measured Productivity Growth Past Present and Future in the Mirror of the Past." (PDF to download)

Shand Greenstein - "The Evolving Structure of Commercial Internet Markets." (PDF to download)

Hal Varian - "Market Structure in the Network Age." (PDF to download)

Sulin Ba, Andrew Whinston, and Han Zhang - "Small Companies in the Digital Economy." (PDF to download)

Josh Lerner - "Small Businesses, Innovation, and Public Policy of the Information Technology Industry." (PDF to download):

Special Report: Business Week, October 4, 1999 - The Internet Age

Special Report: New York Times on E-Commerce

Conference on The Digital Economy --Department of Commerce