Working Paper: NBER ID: w23684
Authors: Avi Goldfarb; Catherine Tucker
Abstract: Digital technology is the representation of information in bits. This technology has reduced the cost of storage, computation, and transmission of data. Research on digital economics examines whether and how digital technology changes economic activity. In this review, we emphasize the reduction in five distinct economic costs associated with digital economic activity: Search costs, replication costs, transportation costs, tracking costs, and verification costs.
Keywords: Digital technology; Economic activity; Search costs; Replication costs; Transportation costs; Tracking costs; Verification costs
JEL Codes: L81; L86; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Digital technology (L63) | Reduced search costs (D83) |
| Reduced search costs (D83) | Easier information gathering and comparison (L15) |
| Easier information gathering and comparison (L15) | Influences price dispersion (L11) |
| Influences price dispersion (L11) | Lowers prices (D41) |
| Digital technology (L63) | Nonrival consumption of digital goods (D16) |
| Nonrival consumption of digital goods (D16) | Increased consumer surplus and welfare (D69) |
| Digital technology (L63) | Lower transportation costs for digital goods (L87) |
| Lower transportation costs for digital goods (L87) | Geographic distance becomes less relevant (R12) |
| Geographic distance becomes less relevant (R12) | Promotes a more integrated global market (F69) |
| Reduced tracking costs (G19) | Enables personalized marketing and price discrimination (M31) |
| Enables personalized marketing and price discrimination (M31) | Firms optimize pricing strategies (L21) |