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The Evolution of Control in the Digital Economy

Fabio Landini ()

No 2012-EP03, Economics Department Working Papers from Department of Economics, Parma University (Italy)

Abstract: Control over digital transactions has steadily risen in recent years, to an extent that puts into question the Internet’s traditional openness. In order to investigate the origins and effects of such change the paper formally model the historical evolution of digital control. In the model, the economy-wide features of the digital space emerge as a result of endogenous differences in culture (users’ preferences including motivation) and technology (platform designs). The model shows that: a) in the longrun there exist two stable cultural-technological equilibria in the digital economy: one with intrinsically motivated users and low control; and the other with purely extrinsically motivated users and high control; b) under a closed economy - i.e. before the opening of the network to commerce, the initial emergence of a low-control-intrinsic-motivation equilibrium can be explained by the specific set of norms and values that formed the early culture of the networked environment; and c) the opening of the network to commerce can indeed cause a transition to a high-control-extrinsicmotivation equilibrium, even if the latter is Pareto inferior. Although it is too early to say whether such a transition is actually taking place, these results call for a great deal of attention in evaluating policy proposals on Internet regulation.

Keywords: : Internet control; Internet regulation; motivation; on-line law enforcement; technology; endogenous preferences; evolutionary games (search for similar items in EconPapers)
JEL-codes: C73 D02 K00 L23 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2012
New Economics Papers: this item is included in nep-cul, nep-ict and nep-net
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