Electronic markets on transaction costs
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EDITORIAL
Electronic markets on transaction costs Rainer Alt 1
Published online: 3 November 2017 # Institute of Applied Informatics at University of Leipzig 2017
Dear readers, This first general research issue in volume 27 of Electronic Markets gives us the opportunity to reflect on a general theoretical perspective that has become important for the field of electronic markets and networked business. In fact, it has been exactly eighty years since the influential paper on transaction cost economics (TCE) appeared from Coase (1937) and exactly thirty years since the seminal paper on electronic markets and hierarchies was published by Malone et al. (1987). The latter was among the first to link TCE with the potentials of information technology (IT) and to argue for a negative impact of IT on transaction costs. This line of argument recognizes that transaction costs have become a powerful instrument within economic theory, which has contested traditional, i.e. neoclassical, positions in favor of a more realistic view on economic processes within the field of so-called institutional economics. This understanding follows the belief that neither economic actors are fully rational nor are products homogeneous or market processes free of cost. It challenges the assumption that equilibrium prices are formed in real-time and conceives transaction costs as costs of using the market. In this sense, transaction costs are viewed Bas the economic equivalent of friction in a physical system^ (Wigand 1997, p. 8). According to TCE, organizations (or hierarchical structures) will grow as long as the costs of conducting a transaction internally (e.g. via employing people for manufacturing in-
* Rainer Alt [email protected] 1
Information Systems Institute, University of Leipzig, Grimmaische Str. 12, 04109 Leipzig, Germany
stead of buying products) are lower than the cost of conducting a similar transaction in the market. TCE introduced three elements that have also become important for understanding the impact of IT on markets. First, transaction costs originate from human and environmental factors (Williamson 1975). Among the human sources of transaction costs are bounded rationality and opportunism. This means that economic actors only possess incomplete information on the market and limited ability to process this information as well as the outcomes of their activity. They also pursue own interests, which may be opportunistic in nature. Environmental factors in turn do not affect the actors, but the characteristics of the transaction. These factors comprise the specificity of the respective asset (i.e. product), the frequency of the transaction as well as the uncertainty of events, which actors may anticipate or not. Second, the friction caused by transaction costs is due to Bcosts of negotiating, monitoring and governing exchanges between people^ (Williamson 1975, p. 20). These activities may be used to structure a transaction into various cost categories and chronological phases. In this vein, search, contracting, moni
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