Six myths of information and markets: Information technology networks, electronic commerce, and the battle for consumer surplus

    Authors

    V. Grover;P. Ramanlal

    Comments

    Authors: contact us about adding a copy of your work at STARS@ucf.edu

    Abbreviated Journal Title

    Mis Q.

    Keywords

    electronic markets; networked markets; myths of markets; economic; theory; seller strategies; buyer strategies; electronic commerce; AVOID ODD-8TH QUOTES; ORDER FLOW; SYSTEMS; NASDAQ; MARKETPLACES; PRICE; Computer Science, Information Systems; Information Science & Library; Science; Management

    Abstract

    The infusion of powerful information networks into business environments is beginning to have a profound impact on the nature of governance between buyers and sellers in the marketplace. Most articles in this area emphasize the benefits to the consumer side of the equation due to reduced coordination, search, and transactional costs. This article presents a broader view of information and markets by elucidating innovative ways that sellers can survive in intensely competitive markets. The article is framed in terms of six myths and counter-myths of information technology and effective markers. The myths provide a conventional view of how increased customization and outsourcing, open architectures, a larger customer base, and low price guarantees will benefit the buyer. The counter-myths illustrate that it is altogether feasible for IT to enable supplier strategies that extract consumer surplus. For instance, suppliers could use IT to price discriminate by tailoring product offerings and charging buyers as much as they are willing to pay. They could also segment markets making comparative shopping difficult, thus avoiding the competitive equilibrium. Also, suppliers could focus on the creation of networks that lock in customers or follow aggressive pricing strategies that deter price competition. Both the myths and counter-myths are presented and examined in a polemical format using simple, fundamental economic arguments. We hope to provide provocative new avenues for discourse in this area by recognizing the complexity of interactions between buyers and suppliers in a highly networked environment.

    Journal Title

    Mis Quarterly

    Volume

    23

    Issue/Number

    4

    Publication Date

    1-1-1999

    Document Type

    Article

    Language

    English

    First Page

    465

    Last Page

    495

    WOS Identifier

    WOS:000086697400002

    ISSN

    0276-7783

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