Traditional microeconomic models and assumptions may no longer be applicable or may need adjustment in the era of the digital economy. Photo: TUCHONG

---

Microeconomics studies how individual economic agents make optimal choices given resource scarcity and how market mechanisms coordinate individual behaviors to effectively allocate resources. Traditional microeconomic theorems and models are built upon assumptions such as “rational man,” perfect competition, and complete information. However, in the era of the digital economy, these assumptions may no longer fully apply or may require significant revision. Exploring changes in supply-demand relationships, consumer behavior, producer decision-making, market structures, and externalities can provide theoretical insights for understanding and addressing the new challenges arising from the digital economy.

Supply-demand relationships: Goods or services traded on digital platforms possess certain characteristics that affect the behavior and decision-making of both the supply and the demand sides, as well as the role and influence of platform companies. First, big data and artificial intelligence can shift the supply curve to the right while flattening it, indicating stronger market competitiveness and adaptability of the supply side in the digital economy. Second, digital products and services, recommendation systems, and social networking services can shift the demand curve to the right while steepening it, suggesting greater initiative and market sensitivity of the demand side in the digital economy. Third, network externalities and economies of scale can shift the supply curve of platform companies downward while shifting their demand curve to the right, demonstrating higher market appeal and expansion potential of those companies.

Consumer Behavior: Traditional consumer behavior theory, based on the “rational man,” holds that consumers choose to maximize their utility or satisfaction under the conditions of limited income and prices. However, consumers who purchase goods or services on digital platforms exhibit several new characteristics. They can leverage digital technologies to optimize their consumption habits, increase efficiency, expand their payment methods for greater convenience and flexibility, and broaden their consumption channels to access more options, as well as enjoy improved services that raise their quality of life. In addition to traditional possessive consumption, the sharing economy, enabled by the digital economy, creates additional value for consumers, while conserving resources and promoting environmental protection. Additionally, faced with an unprecedented amount of information, individuals may adopt simplified decision-making strategies, resulting in lower decision-making quality.

Producer decision-making: The environment and conditions for producer decision-making have changed significantly in the era of the digital economy, reshaping the characteristics of the decisions made. First, data intelligence can have a dual impact on producers’ revenue and cost functions, enhancing producers’ market competitiveness and innovation capabilities in the digital economy. Second, producers’ profit maximization objectives may need to be adjusted. Potential redefinitions of “profit” may complicate and diversify this goal, endowing producers with broader perspectives and higher aspirations. Third, producers should choose appropriate cooperative or competitive models according to their strengths and weaknesses in order to maximize benefits. Fourth, producers should not only focus on economic value creation but also align their efforts in social value creation with their mission and vision, balancing profit generation and social responsibility.

Market structures: Traditional market structure theory, based on supply-demand models, assumes that market prices and quantities are determined by supply and demand, which in turn depend on the producer costs and consumer utility. However, market structures tend to evolve in the digital economy. A layered, monopolistic competition model could give rise to diversified and more dynamic market structures, and the increasing complexity of market structures could introduce new risks, calling for new regulatory policies and governance mechanisms to maintain market order and ensure social welfare.

Externalities: Traditional externality theory, based on the assumption of market failure, asserts that externalities prevent markets from achieving socially optimal resource allocation and that governments or societal intervention—through taxation, subsidies, regulations, or contracts—is necessary to correct these failures. In the digital economy, externality theory may need to be further developed or applied in different ways. First, market prices do not comprehensively reflect the social benefits or costs of transactions due to factors such as network effects and information asymmetry on digital platforms. Market structures may become more complex and dynamic as a result of the positive and negative externalities of the digital economy, affecting the interests and behavior of market participants, which should be properly evaluated and managed. Second, factors such as information asymmetry and information dependence make it challenging to develop and maintain trust and cooperation among market participants on digital platforms. Third, data privacy and cybersecurity play crucial roles in the digital economy and even directly impact trust among market participants and transaction efficiency.

Zhou Xiaoliang (professor) and Wang Zicheng are from the School of Economics and Management at Fuzhou University. Wu Yanghong is from the College of International Economics and Trade at Fujian Business University.

Edited by WANG YOURAN