Claims stated include: reduced transaction and contracting costs, commoditisation, operational cost savings, lower prices, increased competitive advantage for 'winners', reduced vertical integration of firms, disintermediation of physical by electronic suppliers, benefits of standardisation (go-it-alone or industry agreements),
Implied in the argumentation is the application of Transaction Cost Economics (TCE). They apply the ideas of TCE to the potentialities of 'electronic buyer-seller connections'.
In other publications they analysed the transaction costs and the possibility of 'hold-up' (or lock-in) to predict in detail the emergence of 'electronic markets' ten years in advance. The logic of electronic markets predicts that smaller companies will arise. In three US sectors the authors checked, the prediction has not been supported. We've put also on the portal a recent article from the Economist that seems to support TCE ideas.
However in order to fully understand the reasoning of Malone, Yates and Benjamin, it is essential to know a little bit about foundational economics concepts, about markets, models of utility and buyer-seller relationships. The structure of the remaining readings addresses this as follows:
- The assumptions of how markets and the market-price-mechanism works (Eugene F. Fama).
- How markets may fail and how buyers and sellers deal with uncertainty (George A. Akerlof).
- To deeply understand the relationship between the organisation of markets and firms through the discovery and nature of transaction costs and property rights (Ronald H. Coase).
- ...culminating in the development of transaction cost economics to account for different organisational forms (Oliver E. Williamson).
- Finally we look at some characteristics of network industries and assumptions around supply, demand, utility, value and price (Michael L. Katz and Carl Shapiro).
