Wilfred Dolfsma
In this essay, contrary to popular belief, it is argued on the basis of transaction
cost economics that consumers will become dependent subcontractors in electronic
markets. Consumers invest time and effort building up a relationship with a
producer, [r]e-tailer or intermediary; an investment that is idiosyncratic.
The intermediary only needs to invest in generic assets that enable him / her
to automate the process of collecting and processing customer information needed
to differentiate products and discriminate prices. As subcontractors, consumers
face high switching costs and are thus dependent on intermediaries. Virtual
communities of consumers that organize countervailing power will not mitigate
this tendency.