Reducing Buyer Search Costs: Implications for Electronic Marketplaces

Bakos, J. Yannis

doi:10.1287/mnsc.43.12.1676

Cited by 1,722 publications

(1,188 citation statements)

References 20 publications

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“…Personal information sources are capable of providing specialized information directly addressing a specific buyer's concerns, whereas impersonal information sources provide general information that all potential buyers are likely to find useful. Commercial information sources are those that the seller provides -examples of personal commercial sources are salespeople and trade shows; of personal non-commercial sources are internal departments, outside consultants and colleagues; of impersonal commercial sources are trade-publication ads, sales literature and catalogs, and of impersonal non-commercial sources are trade press articles and rating services 9 .…”

Section: Information-intensive Searchmentioning

confidence: 99%

“…The adoption of IOS: this literature has examined, among other things, the incentives for buyers and sellers to invest in IOS (Bakos, 1997), how asset specificity and trust influence IOS adoption (Zaheer & Venkatraman, 1994), the optimal ownership of IOS and the importance of network participants to asset productivity (Bakos and Nault, 1997), how external pressure and organizational readiness affect IOS adoption (Chwelos, Benbasat and Dexter, 2001), how the codifiability of transactions influences their suitability for B2B exchanges (Levi, Kleindorfer and Wu, 2003), and the impact of ownership on adoption and exploitation of IOS (Han, Kauffman and Nault, 2004). …”

Section: Introductionmentioning

confidence: 99%

“…Prior work has also studied how network effects affect IOS adoption and impact (Riggins, Kriebel and Mukhopadhyay, 1994;Wang and Seidmann, 1995;Bhargava and Choudhary, 2004), and the impact of specific technologies like voice mail on inter-organizational effectiveness (Lind and Zmud, 1995). The relative benefits to different players in the value chain has also been investigated: to buyers in the auto industry (Mukhopadhyay, Kekre and Kalathur, 1995), to buyers when IOS drives down search costs (Bakos, 1997), on intermediation (Bailey and Bakos, 1997; Choudhury, Hartzel and Konsynski, 1998), to sellers who can price-discriminate and lock in customers to IOS technologies (Grover and Ramanlal, 1999), on vertical integration (Hitt, 1999), on sharing domain expertise (Argyres, 1999), on the optimality of centralization versus decentralization of decision rights and the resulting performance of a firm facing multiple horizontal markets (Anand and Mendelson, 1997), on policies like vendor managed inventory (VMI) and continuous replenishment (Raghunathan and Yeh, 2001), and on the emergence of biased versus unbiased markets (Granados, Gupta and Kauffman, 2005).…”

Section: Introductionmentioning

confidence: 99%

“…It also highlights the role that different transaction costs, including search and agency costs, play in determining the vertical scope of organizations. It is well-established that electronic markets may decrease search costs (Bakos, 1997). Moreover, Gurbaxani and Whang (1991) point out in their influential early paper that IT lowers agency costs as well as search costs.…”

Section: Introductionmentioning

confidence: 99%

“…For example, search for buyer-specific information involves the use of communication technologies (email, EDI, instant messaging, faxes, phones, letters), whereas search for generic, passive information involves the use of publication technologies (web pages, catalogs). Prior research has shown that price information is relatively easy to convey, whereas conveying product attribute information is more challenging (Bakos, 1997). Parsing the collection of price information, we fine-tune earlier arguments by suggesting that in the context of B2B procurement, getting even the price of so-called commodity goods can be anything but straightforward, if the buyer has to determine terms specific to her case, such as delivery schedules, quantity discounts, commitment to quality levels, and so on.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Electronic Markets, Search Costs and Firm Boundaries

Shankar

Sundararajan

2005

SSRN Journal

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Abstract. We study how electronic markets that facilitate broader inter-firm transactions affect the vertical scope of emerging IT-enabled extended enterprises. We do so by modeling firms in a three-tier value chain who are each connected to a common electronic market that facilitates direct business transactions across tiers, and that lowers the search costs associated with finding an appropriate trading partner for each of them. The extent to which search costs are reduced depends on the complexity of B2B search, and the nature of the supporting technologies that the electronic market facilitates. Variation in search costs affect firms across the value chain in three key ways: by a change in the transaction costs of interaction between firms; by a change in the contracting costs associated with outsourcing owing to changes in the costs of moral hazard for delegated search, and by a change in the price dispersion of upstream input commodities. We capture each of these effects in a new model that integrates search theory into the principal-agent framework, and establish that the optimal outsourcing contract has a simple "all or nothing" performance-based structure under fairly general assumptions. We then apply this model to contrast the effect that different information technologies have on the relative B2B search costs of different firms in the value chain, contrasting the predicted changes of proportionate, constant and convergent changes in search costs. When integrated with a detailed analysis of the nature of B2B search, these results predicts that when B2B search is information-intensive, electronic markets will facilitate an increase in outsourcing, market-based transactions and a reduction in the vertical scope of extended enterprises. In contrast, when B2B search is primarily communication-intensive, electronic markets will lead to tighter integration and an increase in the vertical scope of the extended enterprise. Our research suggest that the nature of the information technologies and of the business activities supported by an electronic market are crucial determinants of the organizational and industry changes they induce, and our results have important implications for a variety of industries in which both technological and agency issues will influence the eventual success of global IT-facilitated extended enterprise initiatives. 0 We thank

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Section: Information-intensive Searchmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Electronic Markets, Search Costs and Firm Boundaries

Shankar

Sundararajan

2005

SSRN Journal

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Electronic Commerce and Electronic Business

Steinfield

2004

The Internet Encyclopedia

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In this chapter, we provide an introduction to electronic commerce and electronic business. A critical theme is that despite the failure of so many dot‐coms, e‐commerce is becoming more pervasive. We also argue that impacts on businesses and markets are complex and often counterintuitive. First, we present an overview of the current status of e‐commerce and provide a definition that focuses on the commercial exchange of goods, services, and information between buyers and sellers, rather than on internal firm transactions. Next, we trace the development of e‐commerce from several predecessors to the Internet that served as prior platforms for electronic commerce. Then, we introduce the notion of a business model, including business‐to‐consumer and business‐to‐business models. We note critical flaws in many early models, such as the lack of attention to profits. We extend the business model discussion by overviewing innovative e‐commerce marketing strategies, many of which highlight new ways of interacting with customers. We explore the use of the Internet to support consumer‐initiated transactions, such as those common on services like eBay and Priceline. One important enabler for e‐commerce, electronic payment, is covered next. Then, we introduce several emerging technologies that are likely to extend e‐commerce into new arenas. We present an overview of important barriers that have slowed the adoption of e‐commerce. In the final section we examine the often counterintuitive results of research on e‐commerce impacts on competition and markets. Key themes and conclusions are provided in the final section.

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Agent-based supply chain disintermediation versus re-intermediation: economic and technological perspectives

Nissen

2000

Int. J. Intell. Syst. Acc. Fin. Mgmt.

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Reducing Buyer Search Costs: Implications for Electronic Marketplaces

Cited by 1,722 publications

References 20 publications

Electronic Markets, Search Costs and Firm Boundaries

Electronic Markets, Search Costs and Firm Boundaries

Electronic Commerce and Electronic Business

Agent-based supply chain disintermediation versus re-intermediation: economic and technological perspectives

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