The digital economy is expanding quickly, particularly in emerging nations. Along with this, the most valuable businesses (by market cap) are all significant participants in the digital economy. Thus, it is no longer possible to dismiss the digital economy as an anomaly in economic theory. Instead, knowing the economics of digital goods and services is crucial to comprehending how the global economy functions. This includes innovations such as social media, apps, cloud computing, mass storage, data mining, cryptocurrencies or sharing services, among others. The corporate landscape of today has been highly affected by these changes. This cross-disciplinary course will let students learn and put into practice the basics of today's economy, considering the key elements of digital technologies. Along with this, it will offer theoretical and practical insights for the students to be applied for the investigation of actual business and economic markets.
Titular Professors
Professors
None
The popularization and widespread use of digital technologies, together with the decline in prices and the increase in the benefits of these technologies, has led to the emergence of new activities in both the public and private sectors. Therefore, the main objective of this course is to provide an understanding of the basic concepts related to these specific trends and, then, to relate them to the new social and economic changes that are emerging as a result of the massive use of new digital technologies. At the end of this course, students should have a basic understanding of: - Understand the determination of supply and demand. - Understand market forces and the determination of prices. - Understand the processes of intermediation and disintermediation of the main digital platforms. - Know the characteristics and functioning of how product and service markets work in the real world, and the applicability and relevance of the theory to understanding these markets. - Understand macroeconomics and the circular flow of income. - How to measure and interpret economic variables such as GDP, CPI, etc. - Key relationship between savings and investment and the determination of interest rates. - Understand the origins of the digital economy through the most recent history of information technologies and computing. - Impact of the digital technological revolution in the creation of new markets. - Social aspects of contemporary business models, with special attention to the popularization of cryptocurrencies.
FIRST SEMESTER:
TOPIC 1: Introduction to the digital economy.
Definition, scope, historical development, ICT infrastructure, what makes the digital economy distinct from prior economic eras.
TOPIC 2: Digital Goods & Services: Properties and Marginal Costs.
Non-rivalry, non-excludability, zero marginal cost, high fixed costs, reproduction cost vs. production cost, digital vs. physical goods.
TOPIC 3: Data as an Economic Resource.
Data economy, data as a factor of production, barter trade (free services for data), data brokers, superstar firms, feedback loops, privacy.
TOPIC 4: Supply, demand and equilibrium.
The price mechanism, the interaction of supply and demand, and the equilibrium price that self-regulates the market.
TOPIC 5: Elasticity and its applications.
The sensitivity of supply and demand to changes in prices and income and the effect on total revenue and profits. How elasticity defines different types of goods.
TOPIC 6: Private goods and public goods.
The different types of goods and their level of excludability. How do we analyze digital data according to this classification?
TOPIC 7: Network Effects and Two-Sided Platforms.
Direct and indirect network effects; demand-side economies of scale; two-sided market pricing logic; tipping; platform subsidization of one side; externalities framework.
SECOND SEMESTER:
TOPIC 1: Market Structure in the Digital Economy.
Concentration and winner-take-all dynamics as consequence of network effects; data as a barrier to entry; superstar firms; digital monopoly and oligopoly; regulatory implications.
TOPIC 2: Digital Business Models and Applied Market.
Freemium, subscription, advertising/attention model, marketplace, sharing economy, gig economy, e-commerce, digital media; applied to real sectors with economic analysis.
TOPIC 3: Economic Practices through the main digital tech-firms (Part 1 and Part 2).
Influence of algorithms on digital search engines. Relationship of platform capitalism to online advertising. Introduction to the effect of "filter bubbles" on society. Definition of "Intermediations" and "Reintermediations". Case analysis through Meta, Apple and Uber.
TOPIC 4: Measuring the Digital Economy.
GDP and what it misses in digital markets; consumer surplus problem with free goods; digital economy as share of GDP; measurement challenges; satellite accounts.
TOPIC 5: Inflation, Productivity and Growth.
How digitalization affects prices (deflationary pressure on digital goods); the productivity paradox; digitisation and economic growth; labor market impacts; the Solow paradox revisited.
TOPIC 6: Introduction to cryptocurrencies and blockchain.
Distributed/shared ledger systems and the "materiality" of digital systems. Differences from traditional financial systems. Definition of the "proof of work" system.
TOPIC 7: The Future of the Digital Economy.
AI and automation; concentration and democratic concerns; digital divide (global and local); regulation and governance; sustainability; open questions.
The lecture component of the course will follow closely the structure and content set out in the following textbooks and reports: Introduction to Digital Economics: Foundations, Business Models and Case Studies, by Øverby, H., & Audestad, J.; Digital Business: Strategy, Management and Transformation by Annmarie Hanlon; Economics, by Gregory Mankiw and Mark Taylor.
Students are expected to come to class prepared, having completed a first approximation to each topic. Lecture slides will be available to download, and casual online videos will also be referenced for class preparation and review. Good preparation will generate more time for interactive class sessions and project work. Students will form project groups for both the first and second semesters. While the first semester project will involve collecting and analyzing data through everyday digital applications, the second semester project will focus on the analysis of so-called 'Digital Economy Business Models'. These projects will need to be submitted and presented before the end of each semester. In addition to group tasks, weekly activities will also be assigned to assess students' understanding of the material covered in class. This should help students develop study routines for the subject and face exams with confidence.
The main methodologies used for this course are:
MD.0Master class
MD.1Problem-oriented classes and exercises
MD.4Seminars
MD.6Project-based learning
Participation 10% Group Project 20% Homework completion 10% Mid-term exam 30% Final examination 30%
Retake policy: There is no retake instance in the course. To pass the course, students must complete all assessment instances and have an overall grade of 5 or more, and pass the group project with a minimum of 5.
WRITTEN REPORT RUBRIC:
Criteria | 1 Point | 2 Points | 3 Points | 4 Points | 5 Points |
Introduction and Background. | Lacks clear introduction; company, product, and market are not defined. | Limited introduction; company, product, or market details are vague. | Basic introduction; company, product, and market are defined but lack depth. | Clear introduction; good definition of company, product, and market. | Engaging introduction; thorough and clear definition of company, product, and market. |
Comprehensive Market and Economic Analysis. | Missing or very limited analysis of key factors such as market structure, demand, supply, elasticity, externalities, costs, and barriers to entry. | Superficial or incomplete analysis; lacks data and depth on multiple economic factors. | Basic analysis covering key economic factors but lacks depth or sufficient supporting data. | Good analysis of key economic factors (market structure, demand, supply, etc.) with relevant supporting data and clear explanations. | In-depth and well-integrated analysis of all relevant economic factors; excellent use of data, strong evidence, and clear application of microeconomic concepts. |
Clarity, Structure, and Organization. | Disorganized and unclear; hard to follow. | Poorly structured; ideas are difficult to follow. | Adequately organized; some parts are clear, but there are inconsistencies. | Well-organized; clear structure with logically flowing ideas. | Exceptionally clear and well-organized; ideas flow logically with strong coherence and clear headings/subheadings. |
Correct Use of Academic Citations and Referencing. | No use of academic citations; format is incorrect or missing entirely. | Limited use of academic citations; multiple errors in citation format. | Adequate use of academic citations; some errors in format or consistency. | Proper use of academic citations with minor errors in format or consistency. | Excellent and consistent use of academic citations in the correct format; all sources are properly credited and formatted according to academic standards. |
Øverby, H., & Audestad, J. A. (2021). Introduction to Digital Economics: Foundations, Business Models and Case Studies.
Annmarie Hanlon (2024). Digital Business: Strategy, Management and Transformation
Mankiw, G., Taylor, M., ECONOMICS, Cengage Learning EMEA, 3rd edition, 2015
In addition to the main textbook, additional readings will be published in the e-study or distributed in class. Most of these readings will consist of articles from newspapers or magazines, typically the Financial Times and The Economist, or from relevant economic blogs or institutions.
Jab?o?ski, A.; Jab?o?ski, M., Social Business Models in the Digital Economy. Palgrave Macmillan, 2020.
Jordan, T.; The Digital Economy. Polity Press, 2020.