The network economy is unique in that it combines the value inherent in both intangible information and tangible commodities. For example, all digitized data must be sent along cables and through motherboards. The authors offer real-world examples, including the "Wintel" standard extant on the majority of modern-day PCs. The network economy depends on the prosperity of both hardware and software components. Furthermore, the authors investigate the implications of the network economy on marketing. For example, information technologies allow for highly precise targeted marketing. Corporations that use precise targeted marketing to their advantage are more likely to succeed than those that do not. The authors offer readers some suggestions to maximize the benefits that can be reaped from the technologies themselves: in essence, how to use the information technologies to benefit information technology markets. In addition to direct marketing issues, the authors also discuss concepts like lock-in and switching costs that pertain specifically to information technology. For example, when Microsoft creates a newer version of their Windows operating system, they bank on the willingness of consumers to upgrade or purchase new computers in order to reap the benefits of the new operating system. In spite of relatively high switching costs, the information technology market thrives. However, lock-in remains a key concern for all market segments, both hardware and software suppliers. Shapiro and Varian devote several book chapters to the costs associated with lock-in and switching.

One of the core concepts discussed in Information Rules relates to the positive feedback mechanism that propels the information technology industries: the more popular a technology the more likely consumers are to use it, even if it means upgrading their computer or communications systems. Shapiro...

Standard economical wisdom, including smart marketing mechanisms and penetration pricing, can help the information technology industries thrive. Therefore, market players need not change the rules of economics; they only need to understand the nuances of network economies better.
Showing readers how to understand the mechanisms underlying the new economy, Shapiro and Varian present their well-researched information in an accessible and practical way. The reason why Information Rules is such a compelling read has to do with two main factors: its academic credibility and its accessibility. Perched somewhere special between bestseller and niche scholastic text, Information Rules is an ideal text that can inform economics scholars and business managers alike. On the one hand, Shapiro and Varian approach their topic in textbook fashion; the book is well-organized, basic, and easy to understand. The publisher includes helpful elements such as italicized text and section headings to anchor the readers' attention. The authors include pertinent information without rambling or becoming bogged down in theory. However, Information Rules is never dull; with both practical wisdom and academic expertise, Shapiro and Varian demonstrate that economics principles can be fascinating. By combining core theory with practical suggestions, the book aims at an intelligent readership interested in applying fundamental economic principles to the information technology-based economy.

Works Cited

Shapiro, Carl and Varian, Hal R. Information Rules: A Strategic Guide to the Network Economy. Boston: Harvard Business School Press, 1998. Retrieved online August 3, 2005 at http://library.books24x7.com/book/id_2411/viewer.asp?bookid=2411&chunkid=0000000001