Multiple questions

Luck led us to write this book.
Each of us became economists because we wanted to apply our
analytical training to better understand how society functions. By our
good fortune, the economics of information, technological change, game
theory, and competitive strategy were emerging fields of inquiry when
we started our professional careers. We jumped in and offered our own
contributions in these areas. Never did we imagine that, twenty years
later, we would find ourselves in the middle of an information revolution. What started as an academic exercise, centered on research and
publishing, has evolved into speeches, consulting work, expert testimony, government service, and even a deanship.
As we strayed from academia, we often heard complaints that economics was not much use in today’s economy. At first, we were perplexed by these complaints, since they often came from the very same
people who sought our advice. Then we solved the puzzle: the complaints were directed at the classical economics most people learned in
school, with its emphasis on supply and demand curves and perfectly
competitive markets, like markets for agricultural commodities. We had
to agree: to an executive rolling out a new software product or introducing the on-line version of a magazine, supply and demand curves just
don’t help much. Yet we knew that a sizable body of work in the field of
economics speaks directly to current issues in the information economy.
Finally, we realized that our clients and friends were thirsty for
knowledge about all manner of topics that we and our colleagues had
been writing about for years but were rarely covered in most classes.
They wanted to know how to set prices for different customer groups,
how to design product lines for information goods, and how to manage
their intellectual property. They wanted to know how to protect themselves from lock-in and how to take advantage of it when possible. We
discovered great interest in the dynamics of software markets: why does
a single company tend to dominate for a time, only to be displaced by a
new leader? And we became more and more involved in the application
of the antitrust laws to the information economy, with one of us headingPreface
off for a stint as the chief economist at the Antitrust Division of the
Justice Department. In short, we lucked out: people actually wanted to
know and use research results from our chosen fields.
At the same time, we kept hearing that we are living in a “New
Economy.” The implication was that a “New Economics” was needed as
well, a new set of principles to guide business strategy and public policy.
But wait, we said, have you read the literature on differential pricing,
bundling, signaling, licensing, lock-in, or network economics? Have you
studied the history of the telephone system or the battles between IBM
and the Justice Department? Our claim: You don’t need a brand new
economics. You just need to see the really cool stuff, the material