Electronic markets on transaction costs

Digitalization in retailing: multi-sided platforms as drivers of industry transformation

“…Transaction cost economics explain why firms engage in markets and open platform-based online marketplaces, and move away from vertically integrated, in-house, production. While originally used in B2B contexts, transaction costs are increasingly relevant also in B2C and C2C markets, where advances in information technology and the increased adoption of electronic marketing and sales channels, now enable customers to reduce transaction costs, for example, by making transactions between customers and businesses more efficient than they would be through traditional channels, and also less complex when coordination and logistics are outsourced to a digital market intermediary such as a digital transaction platform (Alt, 2017).…”

“…As a theoretical lens, this dissertation examines these issues from both a theoretical and behavioral perspective, focusing on how digital transaction platforms change both the nature of transactions and the behavior of individual actors after the adoption and use of digital transaction platforms. While concepts such as transaction cost economics (TCE) and behavioral economics have often been used to examine B2B exchange, advances in information technology now make many of these concepts relevant also from a customer point-of-view, for example, as electronic markets lower transaction costs for customers by making markets more transparent and reducing friction that has previously prevented many economic transactions and interactions from taking place altogether (Alt, 2017). At best, the digital transaction platform can, therefore, create new markets when the platform now increases trust and transparency between transaction partners, as the examples of platforms such as Airbnb and Uber show.…”