How to Study for the Second Midterm

This is the final version of this document. No further substantive changes will be made (e.g., I might correct an obvious typo). 2008-06-03 18:44

Here are some suggestions for studying for the second midterm, including a guide to the kinds of questions to expect on the midterm. More information may be added at any time up to class on Tuesday, June 3.

General information

The second midterm examination is scheduled for Thursday, June 5 at 4:00pm. It will cover Chapters 9--13 and 16--18 and pages 369--372 of Chapter 19 of the Deak textbook, as well as any information covered in lecture. It is a closed-book exam; no reference materials are permitted. You will not need to do precise numerical calculations, so no calculators or other electronic aids will be permitted. Space for answers will be provided on the exam booklet, and ruled areas provided for graphs. However, you should bring scratch paper.

The Innovator's Dilemma

There will be no questions focused on the The Innovator's Dilemma. However, you should be prepared to use the concepts of disruptive innovation and sustaining innovation in answers.

Microsoft, Amazon.com, and eBay

You should be familiar with the business activities of these three firms, as they are frequently used as leading examples of specific strategies, conduct, etc. Where appropriate, you may use other firms as examples if you know about them (for example, from preparing your final report), but knowledge of other firms will not be required in any question. You should focus on business activities and economic logic. Specific legal issues such as antitrust court cases, and specific history (such as dates) will not be required. See for example Questions 1, 7, and 8 of Chapter 9.

Internet Security and e-Commerce

Deak's treatment of these subjects is really weak. A better title for the Chapter would be "Web-Based Market Research", and maybe that's the way I should have spun it ... but I'm a security geek. Sorry. All of which is to say ...

You should skim Ch. 18, "Internet Privacy and Security," but the primary resource is Lecture 19 and the references to Bruce Schneier's website cited there. (Don't worry, they're all short op-ed pieces.)

Chapter 9

Of the key terms and concepts listed on p. 175, you should be able to:

• Describe the following overall strategies for e-commerce startups, and how they are particularly suited (or not) to e-commerce vs. traditional channels: advertising, fast second, get-big-fast, launch-and-learn.
• Define and give examples of first mover advantage.
• Describe the follow kinds of conduct: bundling, dynamic pricing, leverage, predatory pricing, price discrimination, slotting fees.
• Describe the following e-commerce technologies: B2B exchanges, collaborative filtering.
• Describe the following policy terms: just and reasonable terms, neutral common carrier, open access

You should briefly review the other terms in the list, as they may be useful in your answers to some questions.

Questions similar to the "Discussion and Review Questions" on pp. 175-176 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 1, 2, 3, 4, 5, 7, 8, 9, 10, 13, 14.
• Question 3 implies that there are generic arguments for the validity (or invalidity) of first-mover advantages. This is not so. Instead, you should be able to argue whether a particular "advantage" of entering early is a lasting one. Compare Question 5, which is better stated.

Spin Control

• In Question 5, you should explain how e-commerce technology enhances the "fast second" strategy.

Chapter 10

Of the key terms and concepts listed on p. 200, you should be able to:

• Recognize all terms.
• Describe brick-and-mortar, cost-of-service pricing, delay versioning, micropayment, opportunity cost, penetration pricing, ROI, second-price auction, self-selection, shopping bot, standard volume, two-part tariff, value-of-service pricing, versioning.

You should briefly review the other terms in the list, as they may be useful in your answers to some questions.

Questions similar to the "Discussion and Review Questions" on pp. 200-201 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 2, 3, 5, 7, 8, 9, 10.

Spin Control

• In Question 7, you should say which forms of versioning are especially approrpriate in e-commerce, and why.

Chapter 11

Of the key terms and concepts listed on p. 223, you should be able to:

• Recognize all terms.
• Describe API, brand awareness, brand equity, channel conflict, competitive advertising, informational advertising, private-label brand, product differentiation, lock-in.

You should briefly review the other terms in the list, as they may be useful in your answers to some questions.

Questions similar to the "Discussion and Review Questions" on pp. 223-224 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 1, 2, 4, 5, 7, 8, 10, 13, 16.

Spin Control

• In Question 13, note that a better term than "self-organizing" is "aggregation of user-contributed content."

Chapter 12

Of the key terms and concepts listed on p. 246-247, you should be able to:

• Recognize all terms.
• Distinguish between accounting and economic versions of breakeven, cost, loss, and profit.
• Describe allocative efficiency, cash flow, customer acquisition costs, (dis)economies of scale, fulfillment costs, GAAP rules, normal profit, opportunity cost, pro forma profits, productive efficiency, stakeholders, stockholders, transparency.

You should briefly review the other terms in the list, as they may be useful in your answers to some questions.

Questions similar to the "Discussion and Review Questions" on pp. 247-248 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 2--11, 14--16.

Spin Control

• Of Questions 3--5, Question 5 (comparison) is the most relevant form.
• In Question 10, consider whether e-commerce affects the answer.

Chapter 13

Of the key terms and concepts listed on p. 269, you should be able to:

• Recognize all terms.
• Describe application service provider, build-to-order, collaborative product development, disintermediation, direct electronic ordering, just-in-time inventory management, prebuild (build-to-inventory), supply chain management.

You should briefly review the other terms in the list, as they may be useful in your answers to some questions.

Questions similar to the "Discussion and Review Questions" on pp. 269-270 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 1, 2, 6, 7, 8, 9, 11.

Spin Control

• In cases like Question 6, I would not demand that you evaluate whether the relationship is "conclusively causal".

Chapter 14

Will not be tested.

Chapter 15

Will not be tested.

Chapter 16

Of the key terms and concepts listed on p. 334, you should be able to:

• Define digital cash, distance learning, electronic funds transfer, payment system.

You should briefly review the other terms in the list, as they may be useful in your answers to some questions.

Questions similar to the "Discussion and Review Questions" on pp. 334 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 1, 2, 3, 5.

Spin Control

• No particular spin control items.

Chapter 17

Of the key terms and concepts listed on p. 349, you should be able to:

• Define and discuss excise tax, Internet access tax, ITFA, jurisdictional issues, nexus, sales tax, tax avoidance, tax evasion, use tax, value added tax.

You should briefly review the other terms in the list, as they may be useful in your answers to some questions.

Questions similar to the "Discussion and Review Questions" on pp. 349-350 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 1, 2, 5, 6, 7.
• Also distinguish between value added tax (VAT) and sales tax.

Spin Control

• Something like Question 1 might be asked, but as noted above it would definitely be in terms of sales tax vs. VAT (not excise tax), and the jurisdiction is not relevant.
• Question 2 should be taken as referring to the tension between the efficiencies of a single market, and the desire of jurisdictions covering only part of the market to set local (tax) policies locally. I have no idea what is meant by "who is helped by tension X?" so ignore it. (Does he mean insurance companies?)

Chapter 18

The following terms not on Deak's list should be considered more important than that list. You should be able to:

• Describe the security mindset. (Read this essay by Bruce Schneier for more information.)
• Explain why privacy and security are relative concepts, not concepts that can be defined for a system as a whole.
• Distinguish among viruses, trojans, and worms.
• Define and distinguish among identification, authentication, and authorization.
• Define token (the formal name for cookie).
• Define trusted system.
• Define spam and opt-in.
• Define encryption, public key encryption, and digital signature.

Of the key terms and concepts listed on p. 366, you should be able to:

• Recognize all the terms.

Questions similar to the "Discussion and Review Questions" on pp. 367 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 1-10, 12.
• You should be able to explain why Question 11 is misleadingly framed.

Spin Control

• Note that all of these questions are "spun" very differently from the way I treated them in class. You should read them, but more important than answering them would be trying to see how they do, or don't, relate to the discussion in lecture.
• Specifically, wherever "security" or "privacy" is mentioned, try to determine whose security or privacy seems to be threatened.

Chapter 19

Of the key terms and concepts listed on p. 382, you should be able to:

• Define and describe digital divide, disintermediation, monopolist myth, populist myth.

You are not responsible for other terms in the list.

Questions similar to the "Discussion and Review Questions" on pp. 382-383 may appear on the exam as follows. Questions will almost certainly be somewhat altered in form (with the intention to clarify both question and answer).

• Questions 3, 4, 5.

Spin Control

• No particular spin control items.