Information Goods and Information Markets

Information goods and normal goods differ in many ways. Information goods have made a huge impact that has affected producers and consumers in many ways equally. Information goods are goods that are goods that are marketable due to information. Information goods differ from the traditional normal goods and services in that first, you must experience information before you know what it is, (Coiera, 2000). A person would not have to “experience” normal goods because it is typically known what is about to be consumed.

Information goods refer to the unknown. Therefore, a person would have to first observe the good to know what if he or she would like to purchase. This good must be sampled. For example, I use Dave Ramsey’s digital budget worksheet to manage the finances in my household. This is a worksheet that must be purchased. Before the worksheet is purchased, there is a sample worksheet provided in order for a consumer to have an idea of what he or she is about to purchase.

There is also a free 7 day trial of the full version to allow for access for a limited time. Second, the marginal costs of production and reproduction for information goods are low, (Coiera, 2000). It costs little to nothing to produce digital goods versus what it would cost to produce normal goods. Also, the information goods can be reproduced multiple times, without losing anything. If something were to happen to normal goods, the cost of reproduction could be damaging. In addition, once a normal good is consumed it is considered no longer.

Information goods have the ability to be transferred and will almost never have to fall into the situation of not keeping up with supply and demand. Again, using the Microsoft Zune as an example; there is little marginal cost related to the production and reproduction of the music that consumers download. If it is lost or if the device is damaged, it can be downloaded again at no cost. The final difference between the two types of goods is digital information can be transported at low cost, (Coiera, 2000).

Normal goods will have a huge cost for transporting to any location whether it is a short or long distance. Because it costs nothing to transmit information across the internet, the likelihood of high cost to transport digital information is very low. The different types of characteristics of the information goods make it hard for producers to make a profit. This issue has led to producers and similar persons of interest to research and test methods in order to come up with ways in which to maintain profits made from producing and selling information goods.

Some of the ways that have introduced have been to avoid creating information goods that must be traded in such openly competitive environments, attaching the brand identity of a professional organization to an in-formation site(Coiera, 2000) in order to provide better odds of consumers visiting a site of a name they know and trust, and to charge a flat fee for entry to a Web site and allow consumers to then take what they need (Coiera, 2000). It has been proven (e. g. Fishburn P, Oklyzko, 1997) that consumers are more willing to pay a flat rate to get access to everything instead of paying for a single entity and not knowing of they have everything they may need. For the sake of keeping everything relevant, the use of the Zune is a prime example. One of the reasons that I decided to purchase the device is that I can pay one flat fee and download all the music I want instead of having to pay for an individual album in which I may only like one or two songs.

Information goods seem as if it is an all-around better market for consumers with low costs and the ability to reproduce immediately. But what happens when there is an overload of information and little time? That is where the “Malthusian” problem came into play. ‘‘Malthus’ law of information’’ says that the fraction of information that is actually consumed will, with time, approach zero (Coiera, 2000). The fact that the internet has so much information added daily, it has become somewhat overloaded to the extent that people cannot effectively find what they need in a short amount of time.

An individual attention span will only last for so long. The consumption of information will eventually be diverted to other tasks at hand. Another problem is the future’s rising cost for searching for information. Just think that producers are working vigorously in ways to make money. The costs will rise and it will become more pertinent for a consumer to find what they need because of the cost per search.