Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Do electronic marketplaces lower the price of goods?

Do electronic marketplaces lower the price of goods? Ho Geun Lee Do Electronic Marketplaces Lower the Price of Goods? E lectronic marketplaces have become increasingly popular alternatives to traditional forms of commerce [8, 9]. This increase in popularity has led many to predict that one effect will be to lower the market price of goods. This reduced price hypothesis was proposed by Bakos in his seminal article on electronic marketplaces [2]. Buyers in market-intermediated transactions have to bear search costs to obtain information about the prices and product offerings of sellers. High search costs of buyers enable sellers to maintain prices substantially above their marginal costs and result in allocational inefficiencies in market transactions. Electronic market systems can reduce the search costs that buyers must incur to acquire information about seller prices and product offerings, thus enabling buyers to locate suppliers that better match their needs. The lowered search costs allow buyers to look at more product offerings and make it difficult for sellers to sustain high prices. The reduced price hypothesis predicts that buyers will enjoy lower product prices as a result of the increased competition among sellers in electronic marketplaces. An industry case study is presented in this article to demonstrate that the prices http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Communications of the ACM Association for Computing Machinery

Do electronic marketplaces lower the price of goods?

Communications of the ACM , Volume 41 (1) – Jan 1, 1998

Loading next page...
 
/lp/association-for-computing-machinery/do-electronic-marketplaces-lower-the-price-of-goods-kZSff1iNXw

References (14)

Publisher
Association for Computing Machinery
Copyright
Copyright © 1998 by ACM Inc.
ISSN
0001-0782
DOI
10.1145/268092.268122
Publisher site
See Article on Publisher Site

Abstract

Ho Geun Lee Do Electronic Marketplaces Lower the Price of Goods? E lectronic marketplaces have become increasingly popular alternatives to traditional forms of commerce [8, 9]. This increase in popularity has led many to predict that one effect will be to lower the market price of goods. This reduced price hypothesis was proposed by Bakos in his seminal article on electronic marketplaces [2]. Buyers in market-intermediated transactions have to bear search costs to obtain information about the prices and product offerings of sellers. High search costs of buyers enable sellers to maintain prices substantially above their marginal costs and result in allocational inefficiencies in market transactions. Electronic market systems can reduce the search costs that buyers must incur to acquire information about seller prices and product offerings, thus enabling buyers to locate suppliers that better match their needs. The lowered search costs allow buyers to look at more product offerings and make it difficult for sellers to sustain high prices. The reduced price hypothesis predicts that buyers will enjoy lower product prices as a result of the increased competition among sellers in electronic marketplaces. An industry case study is presented in this article to demonstrate that the prices

Journal

Communications of the ACMAssociation for Computing Machinery

Published: Jan 1, 1998

There are no references for this article.