Collective Consuming: Consumers as Subcontractors on Electronic Markets

16 Pages Posted: 9 Sep 2005  

W. Dolfsma

University of Groningen School of Economics and Business

Date Written: April 3, 2005

Abstract

In this article, contrary to popular belief, it is argued on the basis of Transaction CostEconomics that consumers will become dependent subcontractors on electronic markets.Consumers invest time and effort building up a relation with a producer or e-tailer; aninvestment that is idiosyncratic. The producer or e-tailer only needs to invest in generic assetsthat enable him to automate the process of collecting and processing customer information sheneeds to differentiate products and discriminate prices. As subcontractors consumers face highswitching costs and are thus dependent on producers or e-tailers. Virtual communities ofconsumers that organize countervailing power will not mitigate this tendency.

Keywords: transaction cost, consumers, electronic markets, consumers as subcontractors, electronic

Suggested Citation

Dolfsma, W., Collective Consuming: Consumers as Subcontractors on Electronic Markets (April 3, 2005). ERIM Report Series Reference No. ERS-2005-020-ORG. Available at SSRN: https://ssrn.com/abstract=797942

Wilfred Dolfsma (Contact Author)

University of Groningen School of Economics and Business ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

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