Cover image for Re-thinking the network economy : the true forces that drive the digital marketplace
Re-thinking the network economy : the true forces that drive the digital marketplace
Liebowitz, S. J., 1950-
Personal Author:
Publication Information:
New York : AMACOM, [2002]

Physical Description:
xii, 224 pages : illustrations ; 24 cm
Introduction -- Basic economics of the Internet -- Racing to be first : faddish and foolish -- The (non) ubiquity of e-tailing? -- The value-profit paradox : the cruelty of competition and Internet margins -- Can advertising revenues support the Net? -- Copyright and the Internet -- Conclusions : whither supply and demand?
Format :


Call Number
Material Type
Home Location
Item Holds
HF5548.32 .L534 2002 Adult Non-Fiction Central Closed Stacks

On Order



Once upon a time, it was widely thought that Internet commerce could exist apart from traditional business strategy, and that all the known financial models previously relied on could be disregarded. What has become eminently apparent since the dot-com collapse is that standard economic theories apply to Internet business just as much as they do to any other enterprise. Many dot-coms have failed,but e-commerce isn't going away, and business leaders need to understand what went wrong in order to dominate in the real new economy. Rethinking the Network Economy examines exactly where, how, and why so many e-commerce firms went wrong, and how, utilizing traditional economic concepts, businesses can build the foundation for success in the future. The book analyzes issues such as: * How tried-and-true formulas such as network effects, first-mover-wins, and supply-and-demand relate to e-businesses * Why companies counting on locking in consumers will need to rethink their strategies * When selling products over the Internet makes sense (and when it doesn't) * The dangers of comparing profits of brick-and-mortar firms with Internet firms" "

Author Notes

Stan Liebowitz (Dallas, Texas) is a respected economist and a professor of managerial economics at the University of Texas at Dallas

Reviews 1

Choice Review

The magnitude of the economic nonsense written about e-commerce has become widely evident since the technology crash in the stock market. Liebowitz (Univ. of Texas) clearly spells out the myths that led investors, the companies they invested in, and even the business press to act so foolishly in the last few years. Two primary myths that held great credence are brought low by Liebowitz's analysis. The first is the myth that new rules of economics apply to e-commerce but not to "bricks and mortar" firms. With countless examples Liebowitz dispels this notion, pointing out the truism that building a better product (in the eyes of consumers), at the lowest cost, stills wins the market. The second shattered myth is that network effects create a "first-mover advantage," which allows the first firm to gain a significant share of a market in e-commerce to be the ultimate winner and dominant firm in that market. This supposed first-mover advantage evaporates under a second set of examples showing that the old economic rules apply just as well to Internet firms. Liebowitz's clear and sharp analysis avoids unnecessary economic detail. Full citations make this work an excellent starting place for student research regarding Internet commerce. Highly recommended. Lower-division undergraduate through research collections. B. P. Keating University of Notre Dame

Table of Contents

Prefacep. ix
Chapter 1 Introductionp. 1
What You Will Find in Later Chaptersp. 3
Chapter 2 Basic Economics of the Internetp. 9
How the Internet Creates Valuep. 9
Special Economics of the Internet--or Maybe Not So Specialp. 13
Network Effectsp. 13
Economies of Scalep. 15
Winner-Take-Allp. 16
How the Internet Alters the Likelihood of Winner-Take-Allp. 18
Chapter 3 Racing to Be First: Faddish and Foolishp. 25
From Winner-Take-All to First-Mover-Winsp. 26
The Concept of Lock-Inp. 30
Strong Lock-Inp. 32
Weak Lock-Inp. 35
Impacts of Lock-In on First-Mover-Winsp. 36
What Does the Real World Tell Us About Strong Lock-In?p. 38
The Internet and First-Mover-Winsp. 43
Additional Evidencep. 44
Business Lessonsp. 48
Chapter 4 The (Non) Ubiquity of E-Tailing?p. 58
How Might the Internet Transform Business? E-Ordering vs. E-Tailingp. 60
Characteristics of Products That Are Likely to Determine the Extent of the Internet Transformationp. 61
Size and Bulk Relative to Valuep. 62
Immediate Gratification Factor (Impulse Buying)p. 63
Perishabilityp. 64
Experience Products and Free-Ridingp. 64
Thin Marketsp. 67
The Role of Taxesp. 68
What Types of Products Are Most Compatible with Full-Fledged E-Tailing?p. 69
Digitized Productsp. 69
Informationp. 71
Books and CDsp. 73
Examples of Markets Likely to Resist the Internet Assaultp. 75
Grocery Itemsp. 76
Automobilesp. 83
Furniturep. 84
Prescription Drugsp. 85
The Nature of Selling on the Netp. 86
The Evolution of the Current Pricing Systemp. 87
The Concept of Price Discriminationp. 89
What About Auctions?p. 92
Chapter 5 The Value-Profit Paradox: The Cruelty of Competition and Internet Marginsp. 96
The Diamond-Water Paradoxp. 99
The Cruelty of Competition and Attempts to Subvert Itp. 101
Implications for Internet Companiesp. 106
Future Competition and Performancep. 108
Margins and Profits on the Netp. 110
Understanding Profit Marginsp. 110
The Nature of Competition in Internet Marketsp. 114
Chapter 6 Can Advertising Revenues Support the Net?p. 121
The Inadequacy of the Television Modelp. 124
Advertising Effectiveness on the Internetp. 126
Size of Audiencep. 126
Advertising Effectiveness on the Netp. 127
Advertising Budgetsp. 131
Positive Aspects of Internet Advertisingp. 132
Advertising Revenues on the Internetp. 134
Chapter 7 Copyright and the Internetp. 144
The Economic Impacts of Copyingp. 147
Direct Economic Effects of Copying Technologyp. 148
Indirect Economic Effects of Copying Technologyp. 150
The Economic Impacts of Previous New Technologies on Copyright Ownersp. 155
Photocopyingp. 155
Videocassette Recording: The Betamax Casep. 157
Audiotapingp. 158
Digitized Networked Copying: Lessons from the Napster Casep. 159
The Impact of Peer-to-Peer Networks on Revenues--The Theoryp. 161
Indirect Appropriabilityp. 162
Exposure Effectsp. 165
The Impact of Napster on Revenues--The Evidencep. 167
Pure Peer-to-Peer Technologies: The Devil You Don't Knowp. 174
Digital Rights Managementp. 176
DRM Will Not Harm "Fair" Use or Any Usep. 179
DRM Will Not Reduce Production of New Worksp. 181
Public Goods, DRM, and Other Alternativesp. 183
The Bottom Linep. 188
Chapter 8 Conclusion: Whither Supply and Demand?p. 206
Lessonsp. 210
Indexp. 215