Information good in economics and law is a typecommodity whose market value is derived from information it contains. Examples include CDs containing pieces of music, DVDs 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.
In economics, information plays a double role. On one side, perfect information is a key requirement of the efficient-market hypothesis. Here, information is understood to be instantly available for everybody at no cost and fully complete. However, actual markets often depend on information as a commodity, hence information goods. Here, information is understood to be potentially restricted in terms of access, cost, availability, and completeness. 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.
Market failure
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. Information goods may interact on the basis of artificial scarcity. Some information goods can be reproduced and distributed relatively inexpensively. An example would be copying recorded music from radio, cassette player, or CD player to a tape or computer hard disc. Information goods are also not consumed by the act of copying. On this basis, some argue that information should be provided without cost and limitations to copying. As digital technologies and digital electronic networks in some countries became very popular, it was very easy to reproduce and widely distribute some information goods. However, due to the difficulty of controlling the copying and distributing activities of people using such technologies, it is often harder for the producer of such goods to prevent illegal distribution of proprietary works. This operates on the principle of economic excludability.
