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Explain the basic economics of google

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Reference no: EM132506584

Googlenomics. Steven Levy wrote the following in a Wired magazine article on "Google-nomics" - the economics of Google:

What could be more baffling than a capitalist corporation that gives away its best services, doesn't set the prices for the ads that support it, and turns away customers because their ads don't measure up to its complex formulas?

Indeed, the economics of Google may appear quite puzzling: I derive enormous consumer surplus from the myriad Google products that I use every day. I do occasionally click on a Google ad, and even more occasionally buy something based on the ad. But let's agree from the beginning that the amount I end up spending through Google ads is far less - maybe by a factor of 100 - than the benefit I derive from Google's products.

The following questions ask you to uncover the economics of Google.

(a) Explain the basic economics of Google. How is it that they not only survive but profit tremendously by giving away so much of value?

(b) Is Google likely to do too much or too little innovation? Why?

(c) What makes tech companies like Google different from historical dominant firms (e.g., Standard Oil) from an antitrust regulator's perspective?

Reference no: EM132506584

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