What’s so Special About Cyberspace ? Reflections on Elkin-Koren And Salzberger

Abstract

In this article, author Ejan Mackaay presents the defining characteristics of Cyberspace and offers a legal and economic analysis of the relationships between the different actors of the Internet market, in margin of Nina Elkin-Koren and Eli Salzberger works. On the one hand, it is specified that the virtual market of cyberspace is challenging the traditional analysis of economic actors. He presents a new analytical framework that better explain the complex relationships between economic actors in the virtual market. This new approach, called neo-institutional analysis, is based on the notion that economic actors use the scarce resources to be integrated within the institutions that serve them best. On the other hand, it is specified that cyberspace shares a lot of significant characteristics of an economic market. However, being a virtual market, cyberspace does not offer the same limitations as a physical market. Certain limitations imposed by the nature of the physical market helped create certain norms that were generally taken for granted. The absence of such limits and their associated norms thus present a challenge to law and policy makers to better regulate the virtual market. To illustrate the significant divergences between the physical and virtual market, the author analyses the later in the light of the four different market failures defined by the neo-classical economic theory, namely monopolies, the availability of public goods, imperfect in formations and negatives externalities. A monopoly is a market failure that has the effect of greatly reducing competition can be amplified by the bandwagon effect and, if left unchecked, leads to lock-ins or to exclusion. The second market failure analyzed in the article is the availability of public goods. In the context of cyberspace, information can be regarded as the main public good. Yet, certain copyright and intellectual property rules can greatly limit access to this public good. Information deficiencies are another market failure, but cyberspace offers tools for users to gather the appropriate knowledge before engaging in a transaction. Finally, negative externalities, which can be seen as side effects of commercial interactions, are generally lower in cyberspace because of greater exit options. The author concludes by stating that electronic commerce and cyberspace are challenging the traditional economic and political theories. Furthermore, cyberspace offers a new perspective on the phenomenon of the formation of norms.