Re: Re: Question about the economics of information

["Ian Murray" <seamus2001@xxxxxxxxx>]

----- Original Message -----
From: "Sabri Oncu" <soncu@xxxxxxxxxxx>

>
> First of all, we are in agreement here. Indeed, this was what
> Michael was claiming as well if my reading of this sentence from
> his post is not wrong:
>
> > Information creates more problems for
> > traditional economic theory.
>
> Let me give you an example:
>
> Suppose you are in the business of generating a covariance matrix
> such as the J.P. Morgan RiskMetrics matrix. This means you are in
> the business of producing and selling information where the
> information you sell is this covariance matrix plus some
> additional data. Whether you have one or onethousand clients, the
> cost you incur in creating this matrix is the same. The average
> cost of producing this information goes down to zero as the
> number of clients increases indefinitely but marginal cost of
> producing this information is independent of the number of
> clients and always equals zero since the cost of producing the
> matrix is "constant". Put another way, the marginal cost is zero
> because once the information is created, there is no cost
> associated with supplying it to one more client for the firm. For
> example, put it on a website and let the clients get it from
> there.
>
> Hence our agreement: applying marginalism here is silly. If we
> apply it here, the price of this information, that is, the
> covariance matrix, is zero. Hence there is no point of producing
> it.

=================

The whole history of the Grateful Dead, not to mention the huge IT
project my beloved, Lisa, is involved with is a big set of
counterfactuals that makes the above seem too simplistic.....

Ian