Chapter 5 Electronic commerce information's search and selection In physical markets, consumer search activities include reading advertisements, calling endors, and visiting stores. In a virtual marketplace, all these activities seem to converge into Web searches and Web browsing. Not surprisingly, search services are the first market infrastructure to be built in the electronic marketplace 5.1 Consumer Searches and Electronic Commerce Similar to searches in physical markets, online searches can also be carried out either sequentially or simultaneously. Surfing through different Web stores is a sequential search while price search based on price database will be a case of simultaneous search. In either case, online search offers a tremendous advantage over physical search. Besides the lowered costs for time and transportation,computer-based search allows consumers to remember and compare information gathered from many stores. Furthermore online searches enable consumers to process a wide range of information other than pricee g location and name of vendors, terms of sales, quality and performance variables, brand names, sizes and other product characteristics, etc. Comparing prices alone will strain the capacity to process information in physical markets, especially if shopping involves many products. Online search technologies will automate this process and allow consumers to engage in more sophisticated and efficient searches The search and information transmission mechanisms used in the electronic marketplace are too new for researchers to have determined their efficiency. In fact there are contradicting predictions about what that will be. One view is that by using computer technologies such as search engines and intelligent software agents, consumers may be able to search the whole information space at no cost. For example, suppose you want to buy a product. Using a computer program, you initiate a search mechanism that searches all the Web pages on the Internet for a product that matches your needs. The search generates a table of names of sellers, prices, locations and product specifications as well as other relevant information such as seller reputation, past sales records, etc. You then choose a seller among the candidates, and initiate a purchase order While this scenario is close to one of zero search cost, which would produce an efficient market, there are many reasons why the electronic marketplace may not actually be so efficient. In the first place, sellers may not provide relevant information. Second\y,This may be because of access earch algorithms or techniques difficulties-as some Web sites do not allow access-or because all searches inevitably select and process information based on prescribed criteria which may have non-technical problems. Lastly economic analyses indicate that a non-zero search cost, however small it may be, results in noncompetitive pricing. Using electronic media may reduce search costs to an arbitrarily small amount. but the cost will still be non-zero In mathematical models. a reduction in search costs is quite different from an elimination of search costs. In this regard, it may be reasonable to assume that the problems associated with information will persist in electronic commerce as they do in physical markets Consumers may behave differently in the electronic marketplace than in physical markets where search costs are in general positive. This positive-however small- search cost results in higher than competitive prices-popularly known as 'Diamond paradox'(Diamond 1971). Should search costs be always positive? Admittedly, there are shoppers to whom searches seem to be enjoyable instead of costing something. On the Internet, 'surfers often resemble those shoppers happily visit stores and take a look at various merchandises. Armed with ever-present werful archiving programs, online surfers will be able to gather information while enjoying themselves. When they process this information for purchasing decision, the net cost of search may indeed be zero-or certainly not positive-debunking the paradoxical result of monopoly price equilibrium under positive search costs( Stahl 1996)Chapter 5 Electronic commerce information’s search and selection In physical markets, consumer search activities include reading advertisements, calling vendors, and visiting stores. In a virtual marketplace, all these activities seem to converge into Web searches and Web browsing. Not surprisingly, search services are the first market infrastructure to be built in the electronic marketplace. 5.1 Consumer Searches and Electronic Commerce Similar to searches in physical markets, online searches can also be carried out either sequentially or simultaneously. Surfing through different Web stores is a sequential search while price search based on price database will be a case of simultaneous search. In either case, online search offers a tremendous advantage over physical search. Besides the lowered costs for time and transportation, computer-based search allows consumers to remember and compare information gathered from many stores. Furthermore, online searches enable consumers to process a wide range of information other than price—e.g. location and name of vendors, terms of sales, quality and performance variables, brand names, sizes and other product characteristics, etc. Comparing prices alone will strain the capacity to process information in physical markets, especially if shopping involves many products. Online search technologies will automate this process and allow consumers to engage in more sophisticated and efficient searches. The search and information transmission mechanisms used in the electronic marketplace are too new for researchers to have determined their efficiency. In fact, there are contradicting predictions about what that will be. One view is that by using computer technologies such as search engines and intelligent software agents, consumers may be able to search the whole information space at no cost. For example, suppose you want to buy a product. Using a computer program, you initiate a search mechanism that searches all the Web pages on the Internet for a product that matches your needs. The search generates a table of names of sellers, prices, locations and product specifications as well as other relevant information such as seller reputation, past sales records, etc. You then choose a seller among the candidates, and initiate a purchase order. While this scenario is close to one of zero search cost, which would produce an efficient market, there are many reasons why the electronic marketplace may not actually be so efficient. In the first place, sellers may not provide relevant information. Secondly, search algorithms or techniques may not be sufficient to gather all the relevant information. This may be because of access difficulties—as some Web sites do not allow access—or because all searches inevitably select and process information based on prescribed criteria which may have non-technical problems. Lastly, economic analyses indicate that a non-zero search cost, however small it may be, results in noncompetitive pricing. Using electronic media may reduce search costs to an arbitrarily small amount, but the cost will still be non-zero. In mathematical models, a reduction in search costs is quite different from an elimination of search costs. In this regard, it may be reasonable to assume that the problems associated with information will persist in electronic commerce as they do in physical markets. Consumers may behave differently in the electronic marketplace than in physical markets where search costs are in general positive. This positive—however small— search cost results in higher than competitive prices—popularly known as 'Diamond paradox' (Diamond 1971). Should search costs be always positive? Admittedly, there are shoppers to whom searches seem to be enjoyable instead of 'costing something'. On the Internet, 'surfers' often resemble those shoppers who happily visit stores and take a look at various merchandises. Armed with ever-present, powerful archiving programs, online surfers will be able to gather information while enjoying themselves. When they process this information for purchasing decision, the net cost of search may indeed be zero—or certainly not positive—debunking the paradoxical result of monopoly price equilibrium under positive search costs (Stahl 1996)