ON SOME FUNDAMENTAL CONSEQUENCES OF DIGITALIZATION IMPACT ON THE ECONOMY

Abstract

Abstract. During the last decades, the world has entered the era of an information economy, in which knowledge, information, and services are more valuable than manufacturing. The key role in the development of such an economy is the large-scale implementation of digital technologies, which sharply reduce the costs of data storage, processing, and transmission. So, the analysis of these changes’ eff ects on the economic processes and economic agents’ decision-making is an important current task. J. Stiglitz was the fi rst to proclaim the transition to the information paradigm in economics. Current research in this sphere is focused on the analysis of digital markets effi ciency, pricing on digital marketplaces, peculiarities of consumer behavior in a digital world, prospects of successful price discrimination and targeted advertising on digital markets, the importance of feedback and reputation for digital marketplaces design. The purpose of the article is to examine the effects of digital technologies’ mass implementation on the different types of economic costs and economic behavior of individuals and firms. The widespread implementation of digital technologies caused a radical decline in diff erent kinds of costs in the economy, namely search costs, replication costs, transportation costs, tracking costs, and verifi cation costs. The important consequences of search cost reduction are the increased variety of products and lower prices for many goods and services, while price dispersion has persisted. One more fundamental result is the rapid development of digital marketplaces designed to help buyers and seller to fi nd each other. The task of improvement matching between buyers and sellers can be solved in two opposite ways: either by developing some kind of centralized assignment mechanism or by providing eff ective search procedures. To be successful, digital marketplaces should maintain an appropriate level of trust on market and make a tradeoff between two important objectives: effi cient use of all information available and keeping transaction costs low. As any digital activity is fi xed and automatically stored, the easiness of tracking all individuals’ online actions off ers promising perspectives for consumer behavior study and effi cient infl uence on it. The scales of information collected about consumer preferences and habits even today make possible successful price discrimination and highly targeted advertising. That also means an increased threat to consumer privacy because of potential personal data leaks. On the other hand, the reduction of tracking costs means that the identity of any person can be rather easily determined. This decline in the verifi cation costs can help to create new instruments of digital reputation. On e of the key prerequisites for digital marketplace success is the application and permanent improvement of effi cient feedback mechanisms using reputation scores. Summarizing, the large-scale implementation of digital technologies caused a sharp reduction in many important types of economic costs. The decline in search costs resulted in the rapid development of numerous digital marketplaces aimed to improve matching between sellers and buyers in diverse spheres of the economy. The reduction in tracking and verifi cation costs provided prominent opportunities both for consumer behavior advanced research and targeted infl uence on it, and for innovative mechanisms of market participants’ reputation formation. Keywords: information economy, digital technologies, information search costs, digital marketplace, information goods, tracking costs, price discrimination, verifi cation costs.