World-Wide-Welfare: A Micro-Economic Analysis of the New Economy

METEOR Working Paper No. RM/01/004

Posted: 9 Apr 2011

See all articles by P. Jean-Jacques Herings

P. Jean-Jacques Herings

Maastricht University

Maarten Pieter Schinkel

University of Amsterdam - Department of Economics; Tinbergen Institute

Date Written: 2001

Abstract

In the wide and increasing attention for the so-called "new economy", two, not necessarily compatible, issues meet the eye. Firstly, most discussions apply macro-economic concepts, yet secondly their general gist is that the new economy demands new tools for analysis. In this paper, the existing micro-economic tool-kit is searched for theories with which a grip on economics associated with digitalized information is possible. To that end we introduce the distinction between commodity-information, information-commodities, and information-infrastructure. It allows for an application of micro-economic insights in various market structures and their welfare consequences to the new economy. Commodity-information is likely to have a beneficial effect on coordination issues, and thereby the potential to increase welfare. To fully exploit this potential, concerns related to the reliability of information and the confidence in buyers and sellers have to be dealt with. Information-commodities, however, carry the conditions for the rise of natural monopolies with their negative welfare effects. The same is to an even larger extent true for aspects of the information-infrastructure. Market developments in both categories are to be kept in check by government through competition policy, if the great world-wide-welfare potential of the new economy is to materialize.

Keywords: new economy, information, coordination, market structure, infrastructure

JEL Classification: D4, D8, L1, L4

Suggested Citation

Herings, P. Jean-Jacques and Schinkel, Maarten Pieter, World-Wide-Welfare: A Micro-Economic Analysis of the New Economy (2001). METEOR Working Paper No. RM/01/004. Available at SSRN: https://ssrn.com/abstract=319223 or http://dx.doi.org/10.2139/ssrn.319223

P. Jean-Jacques Herings

Maastricht University ( email )

Department of Economics
P.O. Box 616
6200 MD Maastricht
Netherlands
+31 43 3883636 (Phone)
+31 43 3884878 (Fax)

HOME PAGE: http://www.personeel.unimaas.nl/p.herings/herings.htm

Maarten Pieter Schinkel (Contact Author)

University of Amsterdam - Department of Economics ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 7132 (Phone)
+31 20 525 5318 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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