| This thesis evaluates the impact of electronic commerce on consumer and organizational costs. The overall issue addressed is: Are there economic incentives for electronic commerce, or is it just hype? Transaction cost economics theory is used as the basis for predicting the effects of electronic commerce on consumers, organizations, and the economy. Similar to past research, this thesis focuses on costs, uses transactions as the unit of analysis, and assumes rational decision making on the part of consumers and organizations. The major difference is that instead of comparing markets with hierarchies, this thesis compares traditional markets (retail) with electronic markets, and traditional hierarchies (supply chains with limited interorganizational information system support) with electronic hierarchies. Models are presented that enable the cost-based differences to be identified and evaluated.;The cost-based differences between traditional markets and electronic markets are evaluated through an empirical, survey-based, study of consumers in an electronic market in the sports trading card industry. An analysis of organizational market interface costs, and electronic buyer/seller partnerships as a risk reduction strategy, are included. The implications that electronic markets have for present and future organizational revenue sources are discussed. The cost-based differences between traditional hierarchies and electronic hierarchies are evaluated through an empirical, simulation-based, study of the impact of information sharing on supply chains in the automobile, electronics, and clothing industries. Also, dynamic (virtual) supply chains, using a dynamic material allocation strategy, are compared with static supply chains to evaluate the performance of electronic virtual organizations. Secondary data from a previous simulation-based study of supply chains are evaluated to address these issues.;The general conclusion of this study is that the benefits of electronic commerce to consumers (primarily reduction of search costs and prices), and organizations (reduction of market interface and production costs, expansion of market presence, and creation of new sources of revenue) outweigh any increase in costs. Therefore, there are economic incentives for consumers and many types of organizations (product/service providers, transaction brokers, and interactive service providers) to participate in electronic markets and organize as electronic hierarchies to create products and services. |
