Business Model Innovation - Dissertation Example

Dawnay and Shah states seven principles for policy-makers around Behavioural Economics as follows: "1.- Other people's behaviour matters: People do many things by observing others and copying; people are encouraged to continue to do things when they feel other people approve of their behaviour.2.- Habits are important: People do many things without consciously thinking about them. These habits are hard to change -even though people might want to change that behaviour, it is not easy for them.3.- People are motivated to 'do the right thing': There are cases where money is de-motivating as it undermines people's intrinsic motivation, for example, you would quickly stop inviting friends to dinner if they insisted on paying you.4.- People's self-expectations influence how they behave: They want their actions to be in line with their values and their commitments.5.- People are loss-averse and hang on what they consider 'theirs'.6.- People are bad at computation when making decisions: They put undue weight on recent events and too little on far-off ones; they cannot calculate probabilities well and worry too much about unlikely events; and they are strongly influenced by how the problem/information is presented to them.7.- People need to feel involved and effective to make a change: Just giving people the incentives and information is not necessarily enough.

" (Dawnay and Shah, 2005). Looking for rational explanations about how the markets work is a widespread concern of many business agents. Yahoo! is not the exception. PCWelt.de (2006) reports the following trends in the research efforts of this Internet giant: "Yahoo Inc. is researching areas such as. Governments and societies that bet on the market system become more materially prosperous and technologically powerful. The lesson usually drawn from this economic success story is that in the overwhelming majority of cases the best thing the government can do for the economy is to set the background rules - define property rights, set up honest courts, perhaps rearrange the distribution of income, impose minor taxes and subsidies to compensate for well-defined and narrowly-specified "market failures" - but otherwise the government should leave the market system alone”.

Following their logic about prices in a competitive marketplace, they argue along the next lines of thinking: “The main argument for the market system is the dual role played by prices. On the one hand, prices serve to ration demand: anyone unwilling to pay the market price does not get the good. On the other hand, price serves to elicit production: any organization that can make a good, or provides a service, for less than its market price has a powerful financial incentive to do so. What is produced goes to those who value it the most.

What is produced is made by the organizations that can make it the cheapest. And what is produced is whatever the ultimate users value the most.” (Bradford DeLong & Michael Froomkin, 2000). Bradford Delong and Michael Froomkin favor early movers and adopters in the market, especially in the highly competitive business environment that the world driven by technological innovations of today is experiencing.