Reducing Buyer Search Costs: Implications for Electronic Marketplaces
AbstractInformation systems can serve as intermediaries between the buyers and the sellers in a market creating an "electronic marketplace" that lowers the buyers' cost to acquire information about seller prices and product offerings. As a result, electronic marketplaces reduce the inefficiencies caused by buyer search costs, in the process reducing the ability of sellers to extract monopolistic profits while increasing the ability of markets to optimally allocate productive resources. This article models the role of buyer search costs in markets with differentiated product offerings. The impact of reducing these search costs is analyzed in the context of an electronic marketplace, and the allocational efficiencies such a reduction can bring to a differentiated market are formalized. The resulting implications for the incentives of buyers, sellers, and independent intermediaries to invest in electronic marketplaces are explored. Finally, the possibility to separate price information from product attribute information is introduced, and the implications of designing markets promoting competition along each of these dimensions are discussed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 43 (1997)
Issue (Month): 12 (December)
electronic markets; search costs; consumer search; electronic commerce; internet markets;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.