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Collective Consuming: Consumers as Subcontractors on Electronic Markets

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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.

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