Abstract

http://ssrn.com/abstract=251270
 
 

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The Effects of Business-to-Business E-Commerce on Transaction Costs


Luis Garicano


University of Chicago - Booth School of Business - Economics; Centre for Economic Policy Research (CEPR)

Steven N. Kaplan


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

November 2000

NBER Working Paper No. w8017

Abstract:     
In this paper, we study the changes in transaction costs from the introduction of the Internet in transactions between firms (i.e., business-to-business (B2B) e-commerce). We begin with a conceptual framework to organize the changes in transaction costs that are likely to result when a transaction is transferred from a physical marketplace to an Internet-based one. Following Milgrom and Roberts (1992), we differentiate between the impact on coordination costs and motivation costs. We argue that it is likely that B2B e-commerce reduces coordination costs and increases efficiency. We classify these efficiencies into three broad categories (1) process improvements; (2) marketplace benefits; and (3) indirect improvements. At the same time, B2B e-commerce affects incentive costs. In particular, we discuss the impact of the introduction of e-commerce on informational asymmetries. We implement this framework by analyzing detailed internal data from one Internet-based firm to measure process improvements, marketplace benefits, and motivation costs. We present less detailed data and analyses for one other firm. Our results suggest that process improvements and marketplace benefits are potentially large. We find little evidence that informational asymmetries are more important in the electronic marketplace we study than the existing physical ones.

Number of Pages in PDF File: 53

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Date posted: November 24, 2000  

Suggested Citation

Garicano, Luis and Kaplan, Steven N., The Effects of Business-to-Business E-Commerce on Transaction Costs (November 2000). NBER Working Paper No. w8017. Available at SSRN: http://ssrn.com/abstract=251270

Contact Information

Luis Garicano (Contact Author)
University of Chicago - Booth School of Business - Economics ( email )
Graduate School of Business
1101 East 58th Street
Chicago, IL 60637
United States
773-834-2862 (Phone)
773-702-0458 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Steven Neil Kaplan
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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