The Consumer Product Selection Process in an Internet Age: Obstacles to Maximum Effectiveness & Policy Options

Abstract

Intermediaries, like real estate agents, Consumer Reports, and Zagats, have long helped buyers to identify their most suitable options. Now, the combination of databases and the Internet enables them to serve consumers dramatically more effectively. This article begins by offering a three-part framework for understanding the evolving forms of selection assistance. It then focuses on numerous potential obstacles that could prevent shoppers from enjoying the full benefits of these developing technologies. While concluding that adjustments to business strategies and the enforcement of existing laws can effectively overcome most of these impediments, the article identifies several areas where proactive government action may be desirable, such as to prevent the emergence of anticompetitive entry barriers.

Keywords: E-commerce, competition, entry barriers, natural monopoly, collaborative filtering, comparison shopping, infomediaries, search costs, switching costs

JEL Classification: D11, D45, D83, K2, K21, K23, L15, L84, M31