On the market value of information commodities. III. Demand price

Abstract

The derived-demand price of an information commodity depends on the commodity's cost impact on a user's production process. We model an arbitrary production process as a collection of interrelated tasks which can be represented in the form of a production digraph. The nodes of the digraph represent the subtasks in the production process. A directed edge from node a to node b signifies that the subtask corresponding to node b, in order to perform its function, requires input from the subtask corresponding to node a. Appropriate weights, representing costs, are assigned to nodes and arcs. The production digraph allows for investigating cost reduction possibilities. To reduce production costs we have to lower subtask-costs, or lower the total by restructuring. The trick is to determine which subtasks to choose as reduction candidates, or to discover how to restructure the production process so as to reduce the costs. The digraph model is used, in particular, to estimate the maximum price a user should be willing to pay for an information commodity. If a producer could, by introducing some information commodity, lower production costs by x dollars, the user may be willing to pay as much as x dollars for the commodity. © 1992 John Wiley & Sons, Inc.