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Information Rules

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Information Rules
A STRATEGIC GUIDE TO THE NETWORK ECONOMY

Carl Shapiro Hal R. Varian

HARVARD BUSINESS SCHOOL PRESS BOSTON, MASSACHUSETTS

Copyright © 1999 Carl Shapiro and Hai R. Varian All rights reserved Printed in the United States of America

03 02 01 00 99

5

Library of Congres§ Cataloging-in-Publication Data Shapiro, Carl. Information rules : a strategic guide to the network economy / Carl Shapiro and Hal R. Varian. p. cm. Includes bibliographical references and index. ISBN 0-87584-863-X (alk. paper) 1. Information technology—Economic aspects. 2. Information society. I. Varian, Hal R. II. Title. HC79.I55S53 1998 658.4'038—dc21

98-24923 GIF

The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials Z39.49-1984.

To Dawn, Eva, and Ben To Carol and Chris

Contents

Preface ix

l

The Information Economy

2 Pricing Information

19

3 Versioning Information

53

4

Rights Management

83

5 Recognizing Lock-In

103

6 Managing Lock-In

135

7

Networks and Positive Feedback

173

8 Cooperation and Compatibility

227

9

Waging a Standards War

261 297

10 Information Policy

viii I Contents

Further Reading 319 Notes 327 Bibliography 329 Index 335 About the Authors 351

Preface

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...

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