Uncertain Switching Costs and Purchase Decisions in Electronic Markets

Baichun Xiao (), Youyi Feng () and Edward Roche ()

Annals of Operations Research, 2005, vol. 135, issue 1, 179-196

Abstract: As advances in information technologies (IT) significantly reduce the time and cost of acquiring and processing product information, some buyers that traditionally work with one or few suppliers have switched to the market environment. The rapid growth of e-commerce has led researchers to believe that a uniform shift to the electronic markets is inevitable. This article examines the issue from the perspective of uncertain supplier’s performance, switching costs, and the value of information. We show that the presence of uncertainty and switching costs favors contractual relationships between buyers and suppliers. As IT makes the market more competitive, the marginal value of information diminishes. Meanwhile, the overall effect of IT on uncertainty and switching costs is fairly limited. As a result, buyers facing high uncertain supplier’s performance and switching costs may find working with a small number of suppliers a better choice. Copyright Springer Science + Business Media, Inc. 2005

Keywords: uncertainty; purchase decision; switching costs; information technology; electronic markets (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10479-005-6240-x

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