B2B E-Commerce: Why the New Economy Lives
Thomas F. Siems
Federal Reserve Bank of Dallas - Research Department
Southwest Economy, July/August 2001
In an ideal market economy, perfect competition delivers peak performance. For perfect competition to exist, not only are many buyers and sellers needed for each particular good, but perfect information about products (for example, availability, quality and specifications), demand, prices and delivery schedules is also required. As business-to-business (B2B) commerce shifts to the Internet and secure business intranets, better information will move markets closer to the textbook model of perfect competition.
By improving the flow, accuracy and timeliness of information, secure Internet-enabled systems provide greater transparency and efficiency at all points along the supply chain. Simply put, the Internet is a continuation of technological improvements that deliver information faster and cheaper, reduce search and transaction costs in online markets and improve the management of transporting and inventorying products. These savings come from both cheaper information (through lower agency and intermediary costs) and cheaper inputs (through increased supplier competition).
This article explores how new online marketplaces and supply-chain management practices will change transaction processing and business relationships. As B2B electronic commerce (e-commerce) boosts productivity and reduces costs, the long-run beneficiaries will be consumers.
Number of Pages in PDF File: 12
Keywords: business-to-business, B2B, electronic commerce, e-commerce, transaction costs, supply chain management, perfect competition, efficiency, productivity, online markets, e-marketplaces, New Economy
Date posted: August 22, 2001