The internet paradoxes

Please let me know if these references/sites are helpful to you:

1.  Connected for Development? Theory and evidence ... - USC Annenberg

annenberg.usc.edu/sites/.../files/.../Galperin_et_al-2017-Development_Policy_Review.pd...

by H Galperin - ‎2017 - ‎Cited by 2 - ‎Related articles

Mar 12, 2017 - For many years, the so-called 'productivity paradox' puzzled .... between economic growth and internet investments by modelling the supply, the demand and the output of internet investments in three separate models, which ...

2.  The Next Generation of the Internet - Cisco

https://www.cisco.com/c/dam/en_us/about/.../Next-Generation-of-the-Internet.pdf

Technology supply and consumer demand are colliding, driving phenomenal growth in the ..... facing what Cisco IBSG calls the “Internet business paradox. .... http://www.cisco.com/web/about/ac79/docs/innov/IoT_IBSG_0411FINAL.pdf. 23.

Dennis

Dennis Mazur

Dear Uma,

What is your hypothesis and how does it relate to the economic laws of supply and demand?

The economic "laws" of supply and demand relate to price. According to the economic theory, a market in normal goods exists at the point where demand and supply curves intersect. However, markets in goods other than normal goods may exhibit non-classical price behavior. Giffen goods (inferior essential goods offered to impoverished buyers) and Veblen goods (superior inessential goods offered to super-wealthy buyers) are examples. Each of these cases is explicable in terms of assumptions made about characteristics of the buyers and characteristics of the goods. Yet such cases are sometimes claimed to be paradoxical.

Is this the kind "paradox of the law of demand and supply" you wish to compare with internet usage?

The "internet paradox" commonly refers to adverse sociological and psychological effects supposedly caused by internet use, namely loneliness and depression. Related material is readily found: http://lmgtfy.co/?q=internet+paradox.

Best regards,

Michael

Hi Uma,

I believe that you could potentially consider the Internet as a paradox of the law of demand and supply if analyzing the ideology of scarcity in demand and supply. The core of this law is that the more scarce an good is then the more monetary market value it has. However, the Internet is not scarce, if you are keeping within the framework of first-world countries, and it has the potential for infinite supply in comparison to consumer demand but it still costs a substantial amount, creating discrepancies in access. This digital divide is due to the high cost of Internet that has little to do with the scarcity of this resource in comparison to the high demand. Therefore, Internet breaks the classic framework of what supply and demand entails and how it functions in the marketplace making it paradoxical.

I do not know if you are referring to Internet usage as the process of end-users consuming data or the conditions in which consumers receive and use the Internet from their ISP (Internet Service Providers). My answer focused on the latter but I hope it was still helpful.

Best of luck with your research!

Alex

Dear Uma, perhaps you need to specify your paradox more explicitly. Classical microeconomics derives equilibrium price based on the assumption of upward sloping demand and downward sloping supply.

However, internet is a bit different. It has scale economies. For provider high fixed cost is important, while variable cost is almost zero. So the average cost is downward sloping (contrary to many other supply curves).

As for user, it depends on contract. Typically it is per fixed volume per month or unlimited. There might be a multiplicity of equilibria or no equilibrium in this case.

Now about macroeconomic effects. Indeed, productivity seems to rise not fast with higher digitization. What is the problem here? Is there oversupply of digital services? Do we use information not in the most efficient way? Plenty of questions to study.