The Effects of Business-to-Business E-Commerce on Transaction Costs

This paper studies transaction costs changes arising from the introduction of the Internet in transactionsbetween firms. We divide transaction costs into coordination costs and motivation costs. We classifycoordination efficiencies into three categories: process improvements, marketplace benefits, and indirectimprovements. For motivation costs, we focus on informational asymmetries. We apply this frameworkto internal data from an Internet-based firm to measure process improvements, marketplace benefits, andmotivation costs. Our results suggest potentially large process improvements and marketplace benefits.We find little evidence that informational asymmetries are more important in the electronic marketplacethan in the existing physical ones.[...]