Pricing Digital Information Goods and Services on the Net

Many analysts argue that the Internet is producing a fundamental change in the way that business works. The network economy grows faster every day. Internet markets are developing rapidly with information being the single most traded commodity on the Internet. This paper looks at the extent to which conventional pricing theory applies to this type of good and whether it requires modifications in order to be applicable to cyberspace. Do issues such as the ease of consumer arbitrage activity, privacy or convergence constitute a major impediment to the application of conventional price theory? The thesis considers these issues with particular reference to the implications for consumer welfare on the one hand and economic efficiency on the other. The findings of the research with respect to the economic theory’s applicability to the digital information goods and services traded on the Internet is mitigated. The diverse pricing schemes will be applicable according to different industries trading electronically. For the establishments of price discriminatory schedules to be efficient and welfare enhancing, three conditions must be reunited: side issues such as consumer arbitrage, unbundling ought to be resolved and the seller ought to be aware of consumer price sensitiveness and market output must increase.