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Abstract:
We explore the effect of computerization on productivity and output growth using data from 527 large US firms over 1987-1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using one year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to five times greater over long periods (using five to seven year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s.

Abstract:
Many markets have historically been dominated by a small number of best-selling products. The Pareto Principle, also known as the 80/20 rule, describes this common pattern of sales concentration. However, by greatly lowering search costs, information technology in general and Internet markets in particular have the potential to substantially increase the collective share of niche products, thereby creating a longer tail in the distribution of sales.

This paper investigates how demand-side factors contribute to the Internet's ¿Long Tail¿ phenomenon. It first models how a reduction in search costs will affect the concentration in product sales. Then, by analyzing data collected from a multi-channel retailing company, it provides empirical evidence that the Internet channel exhibits a significantly less concentrated sales distribution, when compared with traditional channels. The difference in the sales distribution is highly significant, even after controlling for consumer differences. Furthermore, the effect is particularly strong for individuals with more prior experience using the Internet channel. We find evidence that Internet purchases made by consumers with prior Internet experience are more skewed toward obscure products, compared with consumers who have no such experience. We observe the opposite outcome when comparing purchases by the same consumers through the catalog channel. If the relationships we uncover persist, the underlying trends in technology and search costs portend an ongoing shift in the distribution of product sales.

search cost, product variety, concentration, long tail, Internet, electronic commerce

Abstract:
In an effort to reveal the fine-grained relationships between IT use, patterns of information flows, and individual information-worker productivity, we study task level practices at a midsize executive recruiting firm. We analyze both project-level and individual-level performance using: (1) detailed accounting data on revenues, compensation, project completion rates, and team membership for over 1300 projects spanning 5 years, (2) direct observation of over 125,000 email messages over a period of 10 months by individual workers, and (3) data on a matched set of the same workers' self-reported IT skills, IT use and information sharing. These detailed data permit us to econometrically evaluate a multistage model of production and interaction activities at the firm, and to analyze the relationships among key technologies, work practices, and output. We find that (a) IT use is positively correlated with non-linear drivers of productivity; (b) the structure and size of workers' communication networks are highly correlated with performance; (c) an inverted-U shaped relationship exists between multitasking and productivity such that, beyond an optimum, more multitasking is associated with declining project completion rates and revenue generation; and (d) asynchronous information seeking such as email and database use promotes multitasking while synchronous information seeking over the phone shows a negative correlation. Overall, these data show statistically significant relationships among technology use, social networks, completed projects, and revenues for project-based information workers. Results are consistent with simple models of queuing and multitasking and these methods can be replicated in other settings, suggesting new frontiers for IT value and social network research.

Abstract:
We study the fine-grained relationships among information flows, IT use, and individual information worker productivity, by analyzing work at a midsize executive recruiting firm. We analyze both project-level and individual-level performance using: (1) direct observation of over 125,000 e-mail messages over a period of 10 months by individual workers (2) detailed accounting data on revenues, compensation, project completion rates, and team membership for over 1300 projects spanning 5 years, and (3) survey data on a matched set of the same workers' IT skills, IT use and information sharing. These detailed data permit us to econometrically evaluate a multistage model of production and interaction activities at the firm, and to analyze the relationships among communications flows, key technologies, work practices, and output. We find that (a) the structure and size of workers' communication networks are highly correlated with their performance; (b) IT use is strongly correlated with productivity but mainly by allowing multitasking rather than by speeding up work; (c) productivity is greatest for small amounts of multitasking but beyond an optimum, multitasking is associated with declining project completion rates and revenue generation; and (d) asynchronous information seeking such as email and database use promotes multitasking while synchronous information seeking over the phone shows a negative correlation. Overall, these data show statistically significant relationships among social networks, technology use, completed projects, and revenues for project-based information workers. Results are consistent with simple production models of queuing and multitasking and these methods can be replicated in other settings, suggesting new frontiers for bridging the research on social networks and IT value.

Productivity, Information Worker, Information Technology, Social Networks, Multitasking, Production Function

Abstract:
We present a framework and empirical estimates that quantify the economic impact of increased product variety made available through electronic markets. While efficiency gains from increased competition significantly enhance consumer surplus, for instance by leading to lower average selling prices, our present research shows that increased product variety made available through electronic markets can be a significantly larger source of consumer surplus gains.

One reason for increased product variety on the Internet is the ability of online retailers to catalog, recommend and provide a large number of products for sale. For example, the number of book titles available at Amazon.com is over 23 times larger than the number of books on the shelves of a typical Barnes & Noble superstore and 57 times greater than the number of books stocked in a typical large independent bookstore.

Our analysis indicates that the increased product variety of online bookstores enhanced consumer welfare by $731 million to $1.03 billion in the year 2000, which is between seven to ten times as large as the consumer welfare gain from increased competition and lower prices in this market. There may also be large welfare gains in other SKU-intensive consumer goods such as music, movies, consumer electronics, and computer software and hardware.

Consumer Surplus, Product Variety, Electronic Markets

Abstract:
While it is now well established that IT intensive firms are more productive, a critical question remains: Does IT cause productivity or are productive firms simply willing to spend more on IT? We address this question by examining the productivity and performance effects of enterprise systems investments in a uniquely detailed and comprehensive data set of 623 large, public U.S firms. The data represent all U.S. customers of a large vendor during 1998-2005 and include the vendor's three main enterprise system suites: Enterprise Resource Planning (ERP), Supply Chain Management (SCM), and Customer Relationship Management (CRM). A particular benefit of our data is that they distinguish the purchase of enterprise systems from their installation and use. Since enterprise systems often take years to implement, firm performance at the time of purchase often differs markedly from performance after the systems go live. Specifically, in our ERP data, we find that purchase events are uncorrelated with performance while go-live events are positively correlated. This indicates that the use of ERP systems actually causes performance gains rather than strong performance driving the purchase of ERP. In contrast, for SCM and CRM, we find that performance is correlated with both purchase and go-live events. Because SCM and CRM are installed after ERP, these results imply that firms that experience performance gains from ERP go on to purchase SCM and CRM. Our results are robust against several alternative explanations and specifications and suggest that a causal relationship between ERP and performance triggers additional IT adoption in firms that derive value from their initial investment. These results provide an explanation of simultaneity in IT value research that fits with rational economic decision-making: Firms that successfully implement IT, react by investing in more IT. Our work suggests replacing either-or views of causality with a positive feedback loop conceptualization in which successful IT investments initiate a virtuous cycle of investment and gain. Our work also reveals other important estimation issues that can help researchers identify relationships between IT and business value.

Business Value of Information Technology, Productivity, Simultaneity, Causality, Software Investment, Production Function, Enterprise Resource Planning, Supply Chain Management, Customer Relationship Management

Abstract:
We analyze pricing strategies for digital information goods, such as those increasingly available via the Internet. Because perfect copies of such goods can be created and distributed almost costlessly, any single positive price for copies is likely to be socially inefficient. However, we show that, under certain conditions, a monopolist selling information goods in large bundles instead of individually may nearly eliminate this inefficiency. In addition, the bundling strategy can extract as profits an arbitrarily large fraction of the area under the demand curve for the individual goods while commensurately reducing consumers' surplus. The bundling strategy is particularly attractive when the marginal costs of the goods are very low, when the correlation in the demand for different goods is low, and when consumer valuations for the individual goods are of comparable magnitude. We also describe the optimal pricing strategies when these conditions do not hold; show how private incentives for bundling can diverge from social incentives; and describe a mechanism to recover information about the underlying demand for each individual good. The predictions of our analysis appear to be consistent with empirical observations of the markets for Internet and on- line content, cable television programming, and copyrighted music.

Abstract:
The Internet has significantly reduced the marginal cost of producing and distributing digital information goods. It also coincides with the emergence of new competitive strategies such as large scale bundling. In this paper, we show that bunding can create "economies of aggregation" for information goods if their marginal costs are very low, even in the absence of network externalities or economies of scale or scope.

We find that these economies of aggregation have several important competitive implications:

1. When competing for upstream content, larger bundlers are able to outbid smaller ones.

2. When competing for downstream consumers, the act of bundling information goods makes an incumbent seem "tougher" to single-product competitors selling similar goods. The resulting equilibrium is less profitable for potential entrants, and can discourage entry in the bundler's markets even when the entrants have a superior cost structure or quality.

3. Conversely, by simply adding an information good to an existing bundle, a bundler may be able to profitaby enter a new market and dislodge an incumbent who does not bundle, capturing most of the market share from the incumbent firm and even driving the incumbent out of business.

4. Because a bundler can potentially capture a large share of profits in new markets, single-product firms may have lower incentives to innovate and create such markets. However, bundlers may have higher incentives to innovate.

For most physical goods, which have non-trivial marginal costs, the potential impact of large-scale aggregation is limited. However, we find that these effects can be decisive for the success or failure of information goods. Our results have particular empirical relevance to the markets for software and Internet content.

Abstract:
Internet shopbots compare prices and service levels at competing retailers, creating a laboratory for analyzing consumer choice. We analyze 20,268 shopbot consumers who select various books from 33 retailers over 69 days for a total of 1,512,856 observed offers. Although each retailer offers a homogeneous product, we find that brand is an important determinant of consumer choice. Consumers use brand as a proxy for retailer credibility in non-contractible aspects of the product and service bundle, such as shipping reliability. Our results also suggest that consumers are sensitive to how total price is allocated between the item price, shipping price, and tax.

Abstract:
As the Internet develops into a robust channel for commerce, it will be important to understand the characteristics of electronic markets. Businesses, consumers, government regulators, and academic researchers face a variety of questions when analyzing these nascent markets. Will electronic markets have less friction than comparable conventional markets? What factors lead to dispersion in Internet prices? What are the major electronic commerce developments to watch in the coming years? This paper addresses these questions by reviewing current academic research, discussing the implications of this research, and proposing areas for future study. We review evidence that Internet markets are more efficient than conventional markets with respect to price levels, menu costs, and price elasticity. However, several studies find substantial and persistent dispersion in prices on the Internet. This price dispersion may be explained, in part, by heterogeneity in retailer-specific factors such as trust and awareness. In addition, we note that Internet markets are still in an early stage of development and may change dramatically in the coming years with the development of cross-channel sales strategies, infomediaries and shopbots, improved supply chain management, and new information markets.

Abstract:
We estimate the magnitude of consumer search benefits and costs using data obtained from a major Internet shopbot. For the median consumer, the benefits to searching lower screens are $6.55 while the cost of an exhaustive search of the offers is a maximum of $6.45. We are also able to estimate price elasticities and find that they are relatively high compared to offline markets (-7 to -10 in our base model). Our results suggest that consumers face fairly high costs to search for information online, even in the "nearly perfect" market of the shopbot.

Search costs, shopbot, product differentiation, random coefficients choice model

Abstract:
Once purchased, information goods are often shared among groups of consumers. Computer software, for example, can be duplicated and passed from one user to the next. Journal articles can be copied. Music can be dubbed. In this paper, we ask whether these various forms of sharing undermine seller profit. We compare profitability under the assumption that information goods are used only by their direct purchasers, with profitability under the more realistic assumption that information goods are sometimes shared within small social communities. We reach several surprising conclusions. We find, for example, that under certain circumstances sharing will markedly increase profit even if sharing is inefficient in the sense that it is more expensive for consumers to distribute the good via sharing than it would be for the producer to simply produce additional units. Conversely, we find that sharing can markedly decrease profit even where sharing reduces net distribution costs. These results contrast with much of the prior literature on small-scale sharing, but are consistent with results obtained in related work on the topic of commodity bundling.

Abstract:
Information technology can link geographically separated people and help them locate interesting or useful resources. These attributes have the potential to bridge gaps and unite communities. Paradoxically, they also have the potential to fragment interaction and divide groups. Advances in technology can make it easier for people to spend more time on special interests and to screen out unwanted contact. Geographic boundaries can thus be supplanted by boundaries on other dimensions. This paper formally defines a precise set of measures of information integration and develops a model of individual knowledge profiles and community affiliation. These factors suggest specific conditions under which improved access, search, and screening can either integrate or fragment interaction on various dimensions. As IT capabilities continue to improve, preferences - not geography or technology - become the key determinants of community boundaries.

Globalization, Information Economy, Information Flows, Computerization of Society, Organizational Structure, Economic Impacts, Balkanization, Social Networks

Abstract:
We use a controlled field experiment to investigate the dynamic effects of retail advertising. The experimental design overcomes limitations hindering previous investigations of this issue. Our study uncovers dynamic advertising effects that have not been considered in previous literature. We find that current advertising does affect future sales, but surprisingly, the effect is not always positive; for the firm’s best customers, the long-run outcome may be negative. This finding reflects two competing effects: brand switching and intertemporal substitution. We also find evidence of cross-channel substitution, with the firm’s best customers switching demand to the ordering channel that corresponds to the advertising.

Abstract:
We present findings from a controlled field experiment that allows us to investigate the dynamic effects of retail advertising. The experimental design overcomes limitations that have hindered previous investigations of this issue. Our study uncovers dynamic advertising effects that have not been previously considered in the literature. We find that current advertising does affect future sales but surprisingly, the affect is not always positive; for the firm's best customers the long-run outcome may be negative. We argue that this finding reflects two competing effects: brand-switching and intertemporal substitution. The study also provides evidence of cross-channel substitution, with the firm's best customers switching demand to the ordering channel that corresponds to the advertising.

Advertising, Direct Mail, Field Experiment, Internet, Catalog, long-run demand

Abstract:
Our research empirically analyzes consumer behavior at Internet shopbots- sites that allow consumers to make "one-click" price comparisons for product offerings from multiple retailers. By allowing researchers to observe exactly what information the consumer is shown and their search behavior in response to this information, shopbot data has unique strengths for analyzing consumer behavior.

Furthermore, the method in which the data is displayed to consumers lends itself to a utility-based evaluation process, consistent with econometric analysis techniques.
While price is an important determinant of customer choice, we find that, even among shopbot consumers, branded retailers and retailers a consumer visited previously hold significant price advantages in head-to-head price comparisons. Further, customers are very sensitive to how the total price is allocated among the item price, the shipping cost, and tax, and are also quite sensitive to the ordinal ranking of retailer offerings with respect to price. We also find that consumers use brand as a proxy for a retailer's credibility with regard to non-contractible aspects of the product bundle such as shipping time. In each case our models accurately predict consumer behavior out of sample, suggesting that our analyses effectively capture relevant aspects of consumer choice processes.

Internet, Choice Models, Brand, Service Quality, Partitioned Pricing, Intermediaries

Abstract:
We examine what drives the diffusion of different types of information through email networks and the effects of these diffusion patterns on the productivity and performance of information workers. In particular, we ask: What predicts the likelihood of an individual becoming aware of a strategic piece of information, or becoming aware of it sooner? Do different types of information exhibit different diffusion patterns, and do different characteristics of social structure, relationships and individuals in turn affect access to different kinds of information? Does better access to information predict an individual's ability to complete projects or generate revenue? We characterize the social network of a medium sized executive recruiting firm using accounting data on project co-work relationships and ten months of email traffic. We identify two distinct types of information diffusing over this network - 'event news' and 'discussion topics' - by their usage characteristics, and observe several thousand diffusion processes of each type of information. We find the diffusion of news, characterized by a spike in communication and rapid, pervasive diffusion through the organization, is influenced by demographic and network factors but not by functional relationships (e.g. prior co-work, authority) or the strength of ties. In contrast, diffusion of discussion topics, which exhibit shallow diffusion characterized by 'back-and-forth' conversation, is heavily influenced by functional relationships and the strength of ties, as well as demographic and network factors. Discussion topics are more likely to diffuse vertically up and down the organizational hierarchy, across relationships with a prior working history, and across stronger ties, while news is more likely to diffuse laterally as well as vertically, and without regard to the strength or function of relationships. We also find access to information strongly predicts project completion and revenue generation. The effects are economically significant, with each additional 'word seen' correlated with about $70 of additional revenue generated. Our findings provide some of the first evidence of the economic significance of information diffusion in email networks.

Networks, Information Diffusion, Productivity, Email

Abstract:
In the mid-1990s, productivity growth accelerated sharply in the U.S. economy. In this paper, we identify several other industry-level changes that have occurred during the same time and argue that they are consistent with an increased use of information technology (IT). We use case studies to illustrate how IT has enabled firms to more rapidly replicate improved business processes throughout an organization, thereby not only increasing productivity but also market share and market value. We then empirically document a substantial increase in turbulence starting in the 1990s, as measured by the average intra-industry rank change in sales, earnings before interest, taxes, depreciation and amortization (EBITDA), and other metrics. In particular, we find that IT-intensive industries account for most of this increase in turbulence, especially after 1995. In addition, we find that IT-intensive industries became more concentrated than non IT-intensive industries after 1995, reversing the previous trend. The combination of increased turbulence and concentration, especially among IT-intensive industries, is consistent with recent theories of hypercompetition as well as Schumpeterian creative destruction. We conclude that the improved ability of firms to replicate business innovations has changed the nature of business competition.

Business Process Replication, Hypercompetition, Creative Destruction, Information Technology, Turbulence, Concentration

Abstract:
A key question for Internet commerce is the nature of competition with traditional brick-and-mortar retailers. Although traditional retailers vastly outsell Internet retailers in most product categories, research on Internet retailing has largely neglected this fundamental dimension of competition. Is cross-channel competition significant, and, if so, how and where can Internet retailers win this battle? This paper attempts to answer these questions using a unique combination of data sets. We collect data on local market structures for traditional retailers, and then match these data to a data set on consumer demand via two direct channels: Internet and catalog. Interestingly, our analyses show that Internet retailers face significant competition from brick-and-mortar retailers when selling mainstream products, but are virtually immune from competition when selling niche products. Furthermore, since the Internet channel sells proportionately more niche products than the catalog channel - a phenomenon sometimes called the "Long Tail", the competition between the Internet channel and local stores is less intense than the competition between the catalog channel and local stores. The methods we introduce can be used to analyze cross-channel competition in other product categories, and suggest that managers need to take into account the types of products they sell when assessing competitive strategies.

Internet markets, electronic commerce, competition, retailing, channel, niche products, geography

Abstract:
Social network theories (e.g. Granovetter 1973, Burt 1992) and information richness theory (Daft & Lengel 1987) have both been used independently to understand knowledge transfer in information intensive work settings. Social network theories explain how network structures covary with the diffusion and distribution of information, but largely ignore characteristics of the communication channels (or media) through which information and knowledge are transferred. Information richness theory on the other hand focuses explicitly on the communication channel requirements for different types of knowledge transfer but ignores the population level topology through which information is transferred in a network. This paper aims to bridge these two sets of theories to understand what types of social structures are most conducive to transferring knowledge and improving work performance in face-to-face communication networks. Using a novel set of data collection tools, techniques and methodologies, we were able to record precise data on the face-to-face interaction networks, tonal conversational variation and physical proximity of a group of IT configuration specialists over a one month period while they conducted their work. Linking these data to detailed performance and productivity metrics, we find four main results. First, the face-to-face communication networks of productive workers display very different topological structures compared to those discovered for email networks in previous research. In face-to-face networks, network cohesion is positively correlated with higher worker productivity, while the opposite is true in email communication. Second, network cohesion in face-to-face networks is associated with even higher work performance when executing complex tasks. This result suggests that network cohesion may complement information-rich communication media for transferring the complex or tacit knowledge needed to complete complex tasks. Third, the most effective network structures for latent social networks (those that characterize the network of available communication partners) differ from in-task social networks (those that characterize the network of communication partners that are actualized during the execution of a particular task). Finally, the effect of cohesion is much stronger in face-to-face networks than in physical proximity networks, demonstrating that information flows in actual conversations (rather than mere physical proximity) are driving our results. Our work bridges two influential bodies of research in order to contrast face-to-face network structure with network structure in electronic communication. We also contribute a novel set of tools and techniques for discovering and recording precise face-to-face interaction data in real world work settings.

Social Networks, Face-to-Face Communication, Information Worker, Productivity

Abstract:
A tension exists between two well-established streams of literature on the performance of teams. One stream contends that teams with diverse backgrounds, social structures, knowledge, and experience function more effectively because they bring novel information to bear on problems that cannot be solved by groups of homogeneous individuals. In contrast, the literature on mutual knowledge contends that shared information and experience is essential to effective communication, trust, understanding and coordination among team members. Furthermore, several distinct antecedents of mutual information and knowledge have been hypothesized, making it difficult to manage information overlap in teams. In this paper, we use a unique data set of observed email content from 1382 executive recruiting teams and detailed accounting data on their productivity to examine both the antecedents and performance effects of shared versus diverse information. We find clear evidence of an inverted-U shaped relationship between mutual information and team productivity. A significant amount of information overlap among team members is associated with higher performance while extremes of too little or too much mutual information hamper performance. We also find that geographic dispersion and social network distance are strong predictors of mutual knowledge failures, while demographic dissimilarity and organizational distance do not predict the degree of mutual information in our data. Our work helps bring together the divergent streams of literature on mutual knowledge, information diversity, and the management of team performance.

Mutual Knowledge, Diversity, Social Networks, Demography, Geographic Dispersion, Information Distance, Teams, Performance

Abstract:
The power of digital information processing has increased radically in the past decade. In principle, organizations can now gather and analyze significantly more external information. This, however, depends not only on technology, but also on the firm’s work practices and external orientation. We gather detailed data on organizational practices from 253 firms to examine the hypothesis that external focus is an important determinant of returns to IT investments. First, using survey-based measures, we show that external focus is highly correlated with organizational decentralization and information technology investments. Second, we show that a cluster of practices including decentralization, external focus and IT investment is associated with improved product innovation capabilities. Third, we report estimates from a 3-way complementarities model that indicates that the combination of external focus, decentralization and IT investment is associated with significantly higher productivity. In our sample, firms that have only one or two of these organizational practices in place are not any more productive than firms with none of them. We also introduce a new set of instrumental variables representing barriers to IT-related organizational change and use these measures to show that our results are robust when we account for the potential endogeneity of organizational investments. Our results may help explain why more “networked” regions and economies have experienced especially high returns to IT investment and suggest a set of practices that some managers may be able to use to increase their returns from IT investments.

: Information Technology, Productivity, Organizational Practices, External Focus, Complementarities, High Performance Work Practices, Product Development, High-Tech Clusters

Abstract:
Recently, the relative demand for skilled labor has increased dramatically. We investigate one of the causes, skill-biased technical change. Advances in information technology (IT) are among the most powerful forces bearing on the economy. Employers who use IT often make complementary innovations in their organizations and in the services they offer. Our hypothesis is that these co-inventions by IT users change the mix of skills that employers demand. Specifically, we test the hypothesis that it is a cluster of complementary changes involving IT, workplace organization and services that is the key skill-biased technical change. We examine new firm-level data linking several indicators of IT use, workplace organization, and the demand for skilled labor. In both a short-run factor demand framework and a production function framework, we find evidence for complementarity. IT use is complementary to a new workplace organization which includes broader job responsibilities for line workers, more decentralized decision-making, and more self-managing teams. In turn, both IT and that new organization are complements with worker skill, measured in a variety of ways. Further, the managers in our survey believe that IT increases skill requirements and autonomy among workers in their firms. Taken together, the results highlight the roles of both IT and IT-enabled organizational change as important components of the skill-biased technical change.

Abstract:
We see the influence of the information age everywhere, except in the GDP statistics. More people than ever are using Wikipedia, Facebook, Craigslist, Pandora, Hulu and Google. Thousands of new information goods and services are introduced each year. Yet, according to the official GDP statistics, the information sector (software, publishing, motion picture and sound recording, broadcasting, telecom, and information and data processing services) is about the same share of the economy as it was 25 years ago - about 4%. How is this possible? Don’t we have access to more information than ever before?

The answer isn’t about quantity, it’s about price. The bits that comprise today’s information goods are supplanting the atoms that formed yesterday’s encyclopedias, movie theaters, music CDs and newspapers. Online information may be updated every minute of the day and accessible almost anywhere in the world, but its price is usually radically lower than that of its physical counterpart, if there even is a price.

Information Technology, GDP, Internet

Abstract:
Dozens of markets of all types are in the early stages of a revolution as the Internet and related technologies vastly expand the variety of products that can be produced, promoted and purchased. Although this revolution is based on a simple set of economic and technological drivers, the authors argue that its implications are far-reaching for managers, consumers and the economy as a whole. This article looks at what has been dubbed the "Long Tail" phenomenon, examining how customers derive value from an important characteristic of Internet markets: the ability of online merchants to help consumers locate, evaluate and purchase a far wider range of products than they can typically buy via the traditional brick-and-mortar channels.

The article examines the Long Tail from both the supply side and the demand side and identifies several key drivers. On the supply side, the authors point out how e-tailers' expanded, centralized warehousing allows for more offerings, thus making it possible for them to cater to more varied tastes. On the demand side, tools such as search engines, recommender software and sampling tools are allowing customers to find products outside of their geographic area. The authors also look toward the future to discuss second order amplified effects of Long Tail, including the growth of markets serving smaller niches.

Product Variety, The Long Tail, Search Costs, Recommender Systems, Strategy