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The Internet Trap$
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Matthew Hindman

Print publication date: 2018

Print ISBN-13: 9780691159263

Published to Princeton Scholarship Online: May 2019

DOI: 10.23943/princeton/9780691159263.001.0001

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The Economic Geography of Cyberspace

The Economic Geography of Cyberspace

(p.62) 4 The Economic Geography of Cyberspace
The Internet Trap

Bruce Rogers

Princeton University Press

This chapter is about building simple economic models of online content production. The style of these models owes much to the so-called “increasing returns revolution” that began in the industrial organization literature, and then found expression in the “new trade theory” and in the “new economic geography” scholarship. The simple web traffic model this chapter shows is built upon the assumption that there are strong economies of scale online, both for content production and advertising revenue; that users have at least modest preferences for diversity; and that it takes time and effort for users to seek out online content—that users face search costs or switching costs in navigating the Web. Aside from model building, this chapter also touches upon several other topics, including online aggregation and the economics of bundling. It then lays out what we know about media preferences, and why larger sites now get more money per visitor than small local producers.

Keywords:   economic models, content production, web traffic model, advertising revenue, online content, model building, online aggregation, bundling, media preferences

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