Innovation Incentives for Information Goods
This version published in "Innovation Incentives for Information Goods," Innovation Policy and the Economy eds. Adam B. Jaffe, Josh Lerner and Scott Stern, 2007 vol. 7. Previous version in published as “Slicing the Gordian Knot: A Novel Mechanism for Providing Innovation Incentives for...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
Cambridge, MA; Alfred P. Sloan School of Management, Massachusetts Institute of Technology
2011
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| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/66928 |
| _version_ | 1811081498770538496 |
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| author | Brynjolfsson, Erik Zhang, Xiaoquan (Michael) |
| author_facet | Brynjolfsson, Erik Zhang, Xiaoquan (Michael) |
| author_sort | Brynjolfsson, Erik |
| collection | MIT |
| description | This version published in "Innovation Incentives for Information Goods," Innovation Policy
and the Economy eds. Adam B. Jaffe, Josh Lerner and Scott Stern, 2007 vol. 7.
Previous version in published as “Slicing the Gordian Knot: A Novel Mechanism for
Providing Innovation Incentives for Digital Goods” in Proceedings of the International
Conference on Information Systems, December, 2004. |
| first_indexed | 2024-09-23T11:47:39Z |
| format | Working Paper |
| id | mit-1721.1/66928 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T11:47:39Z |
| publishDate | 2011 |
| publisher | Cambridge, MA; Alfred P. Sloan School of Management, Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/669282019-04-10T15:31:19Z Innovation Incentives for Information Goods Brynjolfsson, Erik Zhang, Xiaoquan (Michael) Online Content Information Mechanism Design Incentives Innovation Bundling Digital Goods This version published in "Innovation Incentives for Information Goods," Innovation Policy and the Economy eds. Adam B. Jaffe, Josh Lerner and Scott Stern, 2007 vol. 7. Previous version in published as “Slicing the Gordian Knot: A Novel Mechanism for Providing Innovation Incentives for Digital Goods” in Proceedings of the International Conference on Information Systems, December, 2004. Innovations can often be targeted to be more valuable for some consumers than others. This is especially true for digital information goods. We show that the traditional price system not only results in significant deadweight loss, but also provides incorrect incentives to the creators of these innovations. In contrast, we propose and analyze a profit-maximizing mechanism for bundles of digital goods which is more efficient and more accurately provides innovation incentives for information goods. Our “statistical couponing mechanism” does not rely on the universal excludability of information goods, which creates substantial deadweight loss, but instead estimates social value created from new goods and innovations by offering coupons to a relatively small sample of representative consumers. We find that the statistical couponing mechanism can operate with less than 0.1% of the deadweight loss of the traditional price-based system, while more accurately aligning incentives with social value. The MIT Center for Digital Business, the National Bureau of Economic Research and that National Science Foundation (IIS-0085725) provided generous research funding. 2011-11-04T15:46:51Z 2011-11-04T15:46:51Z 2006-06-01 Working Paper http://hdl.handle.net/1721.1/66928 en_US MIT Sloan School of Management Working Paper;4780-10 application/pdf Cambridge, MA; Alfred P. Sloan School of Management, Massachusetts Institute of Technology |
| spellingShingle | Online Content Information Mechanism Design Incentives Innovation Bundling Digital Goods Brynjolfsson, Erik Zhang, Xiaoquan (Michael) Innovation Incentives for Information Goods |
| title | Innovation Incentives for Information Goods |
| title_full | Innovation Incentives for Information Goods |
| title_fullStr | Innovation Incentives for Information Goods |
| title_full_unstemmed | Innovation Incentives for Information Goods |
| title_short | Innovation Incentives for Information Goods |
| title_sort | innovation incentives for information goods |
| topic | Online Content Information Mechanism Design Incentives Innovation Bundling Digital Goods |
| url | http://hdl.handle.net/1721.1/66928 |
| work_keys_str_mv | AT brynjolfssonerik innovationincentivesforinformationgoods AT zhangxiaoquanmichael innovationincentivesforinformationgoods |