Information goods

Information good in economics and law is a type commodity whose market value is derived from information it contains. Examples include a CD's containing pieces of music, DVD's containing movie content, and books containing short stories. Information goods are in contrast to material goods such as clothes, food, and cars. These can exist in either digitized form or analog format.

In information goods, the valuable part is a pattern in which the material is arranged including the arrangement of ink on paper or a series of information on a compact disc. Those patterns might be either directly consumed through reading, viewing, or may be used to operate other devices such as a cassette player or a computer. The device, in turn, may produce some consumable pattern of information (such as visual, sound, or text).

In economics, information plays a double role. On one side, perfect information is a key element to explain efficient-market hypothesis. Here, information is understood to be instantly available for everybody at no cost and being complete. However, actual markets often depend on information as a commodity: information goods. Here, information is understood to be restricted in access, costly and often only partially available.

Economic theory faces the problem of constantly dealing with two contradictory concepts of information at the same time. If efficiency is the dominant aspect of analyses, it is likely that commodification is considered to be harmful. If incentive for creation is the dominant aspect of analyses, the protection of the creator is then likely to be dominant.

A consumer may face uncertainty and not be able to assess accurately and reliably the utility of some information goods, such as novels, movies, and newspapers, before consumption of the goods. This is a peculiar property of information goods whereby the process of evaluating utility may require the very process of consumption. This uncertainty is a type of market failure known as the lemon problem and is not unique to information goods.

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