E-commerce and Market Efficiencies:
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
analyzes the costs and benefits of improving patterns of
Economic efficiency is concerned with inputs and outputs - the relationship between the units of scarce resources that are put into the production process and the resulting outputs of some desired product. Generally, economic efficiency is achieved when full employment and full production are realized, and when an optimum product-mix is established. Within the context of finance, the e-commerce paradigm is significant in that it suggests the possibility of n...