The move to ex-ante

Marcel R. Creemers
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Marcel R. Creemers: Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics

No 55, Serie Research Memoranda from VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics

Abstract: The electronic market hypothesis (EMH) has found little support in research practice. Alternative hypotheses have been formulated and tested with more satisfactory results. However, today’s Internet creates new business opportunities which seem to support the original EMH (e.g. Amazon bookshop). This implies that the EMH may be correct in forecasting electronic markets, but wrong in determining the conditions under which this would take place. Moreover, modern electronic markets appear not always to evolve along the predicted process (biased, unbiased, personalized markets). This article investigates former EMH-related research (Hess & Kemerer, 1994) and analyzes a few modern Internet business successes and failures, concluding that (1) the EMH-condition 'complexity of the product description' appears to be equivocal and (2) the degree to which ICT supports Ex-Ante actions (such as exchanging product and supplier information, advise, quotes and negotiating) seems to be an important discriminating factor between success and failure in electronic commerce (whether in markets or in hierarchies). Furthermore, it is shown that virtual communities, the evolution of which is not covered by the EMH, may play an important role as electronic markets too. It is shown that augmentation of the EMH can not solve the problems, and a new hypothesis, the Move to Ex-Ante hypothesis, is formulated.

Keywords: electronic markets; transaction costs; virtual communities. (search for similar items in EconPapers)
Date: 1997
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