Web 2.0 is Cheap: Supply Exceeds Demand
Prometheus, Vol. 28, No. 3, pp. 267-285, 2010
22 Pages Posted: 1 Apr 2009 Last revised: 5 Aug 2014
Date Written: September 1, 2010
Abstract
The aim of this article is to evaluate, from an economic perspective, the efficiency of Web 2.0. It demonstrates that, because of the non-monetary nature of Web 2.0, several sources of inefficiencies (search costs, externalities, crowding out and adverse selection) exist. Nonetheless, the economic nature of digital products and the expected low value of most online content make it impossible to adopt a simple market scheme for Web 2.0. In contrast, this article introduces a concept of demand-driven Web 2.0 (as opposed to the current Web 2.0, which is supply-driven) that is expected to provide stronger incentives, through financial reward, for high quality content within a Web 2.0 environment.
Keywords: Web 2.0, Transaction costs, Externalities, Adverse selection, Efficiency, Public Goods
JEL Classification: H41, D61, D62, D23, D82, D83, L15, L86
Suggested Citation: Suggested Citation
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