Singh_Econ139A_S2011_Lec15

Singh_Econ139A_S2011_Lec15 - Market Organization and...

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1 business. technology. society. Market Organization and Intermediaries The Economics of Electronic Commerce (Economics 139A) UCSC Spring 2011 Professor Nirvikar Singh April 29, 2011
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What is a market? A market is an arrangement that allows buyers and sellers to exchange things, trading what they have for what they want In this sense, a market is an abstraction, without a particular location or institutions Versus market as marketplace “Because trade had until recently required a place where buyers and sellers could come together to safely exchange their goods and money, markets originally developed where there was good access to transportation and communications.…” (Downes and Mui)
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What e-commerce does to markets E-commerce fundamentally changes the physical organization of markets Buyers and sellers are able to avail of spatial separation on a scale and with a scope never before possible Information flows permit more rapid adjustment And information processing allows for more complex forms of organization to be implemented at reasonable cost
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Markets: Time, Product Range and Mobility Medieval towns had ‘market days’ The growth of populations and greater specialization in production led to permanent markets Supermarkets, department stores and shopping centers provide economies of scope Economies of scope may persist online As transportation and delivery costs decline relative to the fixed costs of market organization, the geographic scope of markets increases
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Market Institutions: Pricing Rules Haggling, bargaining and negotiation Posted prices Auctions
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What are intermediaries? Narrow view : a ‘middleman’, coming between a buyer and a seller in a specific transaction Broader view : anyone along a point of the entire value chain from raw inputs to final consumption Example : Dell is an intermediary in this broad sense, because it collects hardware and software components from a variety of suppliers, and assembles them into computers that are ready to use
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Online Intermediaries EBay Amazon Yahoo Dell Travelocity Shopping.com Many others
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This note was uploaded on 09/09/2011 for the course ECON 139a taught by Professor Turnbull,s during the Spring '08 term at UCSC.

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Singh_Econ139A_S2011_Lec15 - Market Organization and...

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