d even in the real-world imperfectly competitive markets, efficiency is a desirable and attainable goal.
A perfect market, in theory, would be efficient because it would allow all buyers and sellers to meet together, with full information about supply and demand. Under perfect competition, equilibrium is reached when marginal cost=marginal revenue=short-run average total cost=long-run average total cost (Solomon, 1980). There would be no barriers to entering or leaving the market, and every potential buyer would be matched with a supplier able to meet his needs (The Economist, 2000). Prices would be at exactly the level capable of keeping supply and demand in steady state equilibrium, and "transaction costs" such as time spent in seeking the right product would be eliminated. Most traditional markets never achieve such perfection, and therefore never achieve full economic efficiency. The Internet, however, is being investigated as a potentially efficient market in that if fosters aggregation, or bringing together a substantial number of buyers and sellers with a fixed menu of prices, and cutting transaction costs through one-stop shopping (The Economist, 2000). It is this Internet attribute that will be explored in the present report, which will identify the current thinking among industry analysts and economists as to the efficiency produced by e-commerce underpinned and made possible by information technologies (ITs).
Electronic commerce (e-commerce) accounts for about $1.5 billion per year following the phenomenal growth of the Internet (European Business Review, 1999). What the Internet offers is a unique opportunity for buyers (consumers and businesses alike) and sellers to "meet" in a virtual marketplace and capitalize upon a form of competition in which full information is generally available to both parties to the potential transaction. Companies that set up electronic markets are searching for ways to maximize future ...