As the development of the Internet and information technology proliferates the variety of digital offerings and channels for commerce, it is important for businesses, consumers, government regulators, and academic researchers to understand the characteristics of digital products and nascent markets for selling these products. With its new cost structures and innovative business models, the gradually-maturing digital economy constitutes a grand experiment which will put many of our theories to the test as well as present opportunities to shape changes....[ Read more ]

As the development of the Internet and information technology proliferates the variety of digital offerings and channels for commerce, it is important for businesses, consumers, government regulators, and academic researchers to understand the characteristics of digital products and nascent markets for selling these products. With its new cost structures and innovative business models, the gradually-maturing digital economy constitutes a grand experiment which will put many of our theories to the test as well as present opportunities to shape changes.

Two studies in this dissertation deal with the challenges presented by the digital economy in designing markets for online personalization markets and app markets fostered on mobile devices, respectively. In the first study, I propose a preservation instrument in constructing an incentive-compatible menu, which balances the firm’s objective and the privacy needs of different consumers. Based on the proposed mechanism, I identify and evaluate alternative legislative options for a regulatory body, such as the Federal Trade Commission (FTC), in governing the information practice of the firm. In the second study, I examine the design issue of platform firms when developing intervening strategies for the complementary goods market, and examine the effectiveness of non-price control mechanisms in allowing platform owners to gain competitive advantage. Overall, this dissertation contributes to building a deeper understanding of the digital economy as well as helping managers and government regulators with many important decisions for which there is scant experience to rely upon.