E-commerce and Market Efficiencies Cost Tran

Cost Transparencies and Reduction of Elements

The emergence of the Internet as a locus for commercial activities in the form of "e-commerce" has led some economists to conclude that new possibilities for development of a truly and generally efficient marketplace are being created (Anonymous, The Economist, 2000). Prior to the advent of the Internet, most economists recognized that they were unlikely to encounter a truly perfect, perfectly competitive, and therefore fully efficient market outside the pages of textbooks. The Internet, however, is being viewed as having almost this potential. From the perspective of finance, cost transparencies and a reduction in the number of actors present in (and benefitting from) the value-added chain can be described as among the most salient financial features of the Internet as a setting for commercial activities.

Economics is defined as a science of efficiency in the use of scarce resources (McConnell, 1988). Other, more standardized definitions include that offered by Samuelson (1980, p. 2):

Economics is the study of how people and society end

up choosing, with or without the use of money, to

employ scarce productive resources that could have

alternative uses - to produce various commodities and

distribute them for consumption, now or in the future,

among various persons and groups in society. Economics

. . .
ten in the form of software programming - function as a way of replicating organizational functions that act as intermediaries between a purchaser and a seller. Agents lower search costs to consumers and suppliers alike, thus reducing "transaction costs" that are associated with market inefficiencies. Michael Hickins (1999) provided an overview of the growth in e-commerce in both the consumer and business-to-business markets. The following chart depicts current and projected e-commerce levels. Online Transactions, in Billions ($) Market Segment 1998 2003 Business-to-business $43.0 $1,300.0 Consumer $8.0 $108.0 (Hickins, 1999, p. 6). Hickens' (1999) thesis is that the business-to-business side of e-commerce is where the greatest profitability lies; this is because online auctions and bidding, and better-informed purchasing decisions lead to greater cost savings than do supply-chain tools like electronic data exchange. In other words, Hickens (1999) takes the position that online business-to-business sales are managed without the intervention of additional actors in the value-added chain and that the omission of these actors leads to cost savings. Cost savings in turn lead to maximization of capital
. . .

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Approximate Word count = 3177
Approximate Pages = 13 (250 words per page)

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