Title

A THEORY BASED INFORMATION PRICING SYSTEM

Abstract

The network economy is conducive toward generating large and essentially monopolistic corporations. Economic success in this ecosystem means that a small group of entrepreneurs and investors enjoy huge returns while often piggy-backing on the good will of millions of users who contribute valuable information freely. Undoubtedly, these huge corporations are central and important; however, this paper proposes a pricing scheme that will enhance the rate of trade between individuals or small businesses. The search for a valid and profitable business model for small transactions is as old as the web itself. The novelty of the current proposition is that it is grounded in theory. We put forward a pricing mechanism that accounts for special characteristics of information including the subjective perception of value, its nature as an experience good, the reproduction and distribution costs which usually approach zero, and the dynamics of the social exchange environment. We describe a pricing system which we have named FlexiPrice that accounts for the characteristics we described and offers: incentive compatible bidding, experience and satisfaction-based voluntary payments, and pricing functions based on social parameters. FlexiPrice is designed both as a standalone system and as a component in a larger EC-funded system. The standalone version will be used for laboratory experiments in order to deepen the theoretical understanding of the value of information. The embedded system will be used for field testing with actual buyers and sellers of information. This short paper is a research-in-progress.

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