Course Objectives

• Providing a basic understanding of the market forms that characterize ICT markets
• Discussing the manyfold possibilities of price discrimination
• Providing a basic understanding of game theory principles and their application to ICT Markets. (Dominant and Nash Equilibria, Subgame-perfect Equilibria)
• Discussing the optimal handling of intellectual property rights in three areas: (i) copyright and the associated problems of pirated copies, (ii) patents and the associated (forms of patents, patent rights, license fees), (iii) motivation of companies and private individuals who are involved in open source and open commons.
• Discussion of the special features of ICT markets - in particular management decisions in connection with (i) switching costs and lock-in. (ii) direct and indirect network externalities
• Explaining the trade-offs between various fundamental strategic management decisions required when introducing new products/technologies.
• Discussing potential reasons of market failures in ICT markets together with the economic instruments available to prevent this market failure.

• Students are able to identify the economic peculiarities of specific information and communication technology markets. (LO7)
• Students have the skills to apply their knowledge in the competitive environment of the highly concentrated oligopoly markets that characterize information and communication technology markets, and they are able to apply the findings of game theory principles. (LO8)

• Students are familiar with the basic concepts of competition policy [keywords: monopolies, competitive and competitive competition, collusion] (LO1)
• Students understand the strategies for product and price differentiation for information goods in the broadest sense (software, newspapers, news, music, film, ....); [keywords: delaying, versioning, bundling, promotional pricing, personalized pricing, ....] (LO2)
• Students have knowledge about the optimal economic handling of copyrights and patents. (LO3)
• Students know the strategies and implications of system decisions (lock-in); [keywords: switching cost, lock-in cycle, classification of lock-in, valuing an installed base of customer, ....] (LO4)
• Students understand the consequences that result from the existence of network externalities (networks in the economic sense!); [keywords: collective switching cost, migration paths (revolution versus evolution), dynamics of technological innovations, strategies on markets with positive feedback] (LO5)
• Students know different strategies and implications in the formation of standards and alliances; [Keywords: openness versus control, tactics in formal standard-setting, war of standards] (LO6)

Subject The course studies the fundamentals and peculiarities of economic decision-making processes in the field of information and communication technology markets. The course takes an industrial organization perspective to this topic. Over a wide range, the course takes the perspective of a profit-maximizing company and discusses the possibilities for profit maximization of companies. Of course, the resulting consequences for consumers are also discussed. Moreover, the welfare perspective of a benevolent dictator is adopted, who considers in which areas of information and communication technology markets would be necessary. The course topics are:

• Market Forms and Strategies in ICT Markets
• Price Discrimination
• Game Theory
• Management of Intellectual Property
• Lock-In
• Network Externalities
• Introduction of New Technology
• Cooperation and Compatibility in ICT Markets
• War of Standards
• Social Planer in ICT Markets