Strategic Positioning in Information Product Space

Networked information technology, in particular the Internet, has created new opportunities for the exchange of digital information goods in an environment where the consumer population is changing and firms face a great deal of uncertainty. In this case, firms must decide how much they should learn about the consumer population, given that this learning is costly.

More broadly, we are interested in how agents in such an economy can form or locate niche markets, rather than competing for the mass market, and in identifying the conditions needed for niches to appeal to producers. In general, niches appear to be associated with a firm's desire to learn about a consumer population (as opposed to exploiting current knowledge) and its willingness to forego some current profit in the hope of extracting larger profits in the future.

This involves both analytical work, in which we determine whether rational producers should choose to learn and identify the conditions needed for niches to be attractive to producers, and computational work, in which we characterize the behavior of adaptive producers within a parameterized model and study how changed in this model affect learnability and the desire to explore rather than exploit.