An underlying theme in much of the work in the field is that existing government regulation of copyright, security, and antitrust is inappropriate in the modern world.
First, economists are interested in understanding digitization related policies such as network infrastructure investment and subsidies for Internet access.
[7][8] This is an important topic because many economists believe that traditional measures of economic growth, such as GDP, understate the true benefits of improving technology.
[9] Digitization has coincided with the increased prominence of platforms and marketplaces that connect diverse agents in social and economic activity.
Many online platforms replicate identical process or algorithms at virtually no cost, allowing them to scale the network effect without encountering diminishing returns.
[11][12] A particularly important issue is whether markets for online platforms have a tendency towards "winner-takes-all" competitive outcomes, and should be subject to antitrust actions.
Online platforms often drastically reduce transactions costs, especially in markets where the quality of a good or trading partner is uncertain.
[13] For example, eBay drastically increased the market for used consumer goods by offering a search engine, reputation system, and other services that make trade less risky.
Prominent examples of open-source software include the Apache HTTP Server, Mozilla Firefox, and the Linux operating system.
[18] Another area of study is estimating the degree to which GDP and other measures of economic activity are mis-measured due to open source software.
[20] Sharing of open hardware designs can generate significant value because of the ability to digitally replicate products for approximately the cost of materials using technologies such as 3D printers.
[21][22] Another active area of research studies the incentives to produce user-generated content such as Wikipedia articles, digital videos, blogs, podcasts, etc.
Initially hypothesized by Bakos (1997),[29] the first wave of this research empirically documented lower prices, but still substantial dispersion.
At the same time, the zero marginal costs of distribution mean that top-selling (superstar) items never go out of stock and therefore can achieve even higher sales (Anderson, 2006).
Several papers in the literature attempt to quantify the economic impact of increased product variety made available through electronic markets.
One particularly important aspect of digitization for consumers is the increased use of reputation systems on retail websites and online marketplaces.
A key area of research in digitization studies whether online reputations accurately reveal both the vertical and horizontal quality of a good.
For example, a large literature studies the magnitude and causes of skill-biased technical change, the process by which technology improves wages for educated workers.
Work by Bresnahan, Brynjolfsson and Hitt (2002) [52] found evidence of organizational complementarities with information technology and boosted the demand for skilled labor.
However, digitization and ease of copying has made it difficult to defend intellectual property rights, especially in the case of copyright.
Varian also provides a detailed description of several business models which potentially address the greater difficulty of enforcing copyrights as digitization increases.
Alternative business models for intellectual property holders include selling complementary goods, subscriptions, personalization, and advertising.
Empirical research in this area studies the effects of Internet file-sharing on the supply and demand for paid content.
Privacy and data security is an area where digitization has substantially changed the costs and benefits to various economic actors.
However, the large-scale ability of firms to collect, parse, and analyze detailed micro-level data about consumers has shifted the policy focus.
[58][59] Goldfarb and Tucker (2011a)[60] wrote the first paper to empirically study the economic effects of privacy regulation for the advertising-supported Internet.
As well as this main effect, their research also suggests that privacy regulation might change the web landscape in unanticipated ways, with advertising becoming even more intrusive.
[65] Another issue is that companies with new, Internet based business models, such as Airbnb and Uber, pose challenges for regulation aimed at traditional service providers.
For example, electronic medical records have the potential to make healthcare more effective but pose challenges to privacy policy.