Information Transparency Hypothesis: Economic Implications of Information Transparency in Electronic Markets

Information Transparency Hypothesis: Economic Implications of Information Transparency in Electronic Markets

Kevin Zhu (University of California at Irvine, USA)
Copyright: © 2005 |Pages: 28
DOI: 10.4018/978-1-59140-444-6.ch002
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Abstract

This chapter explores the private and social desirability of information transparency of a business-to-business (B2B) electronic market that provides an online platform for information transmission. The abundance of transaction data available on the Internet tends to make information more transparent in B2B electronic markets. In such a transparent environment, it becomes easier for firms to obtain information that may allow them to infer their rivals’ costs than in a traditional, opaque market. How then does this benefit firms participating in the B2B exchanges? To what extent does information transparency affect consumers and the social welfare in a broader sense? Focusing on the informational effects, this study explores firms’ incentives to join a B2B exchange by developing a game-theoretic model under asymmetric information. We then examine its effect on expected profits, consumer surplus, and social welfare. Our results challenge the “information transparency hypothesis” (that is, open sharing of information in electronic markets is beneficial to all participating firms). In contrast to the popular belief, we show that information transparency could be a double-edged sword. Although its overall effect on social welfare is positive, its private desirability is deeply divided between producers and consumers, and even among producers themselves.

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Dedication
Table of Contents
Acknowledgments
Kerem Tomak
Chapter 1
David Dranove, Neil Gandal
In April 1997 a consortium of hardware manufacturers and movie studios launched the DVD format. By that fall, electronics retailing giant Circuit... Sample PDF
Surviving a Standards War: Lessons Learned from the Life and Death of DIVX
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Chapter 2
Kevin Zhu
This chapter explores the private and social desirability of information transparency of a business-to-business (B2B) electronic market that... Sample PDF
Information Transparency Hypothesis: Economic Implications of Information Transparency in Electronic Markets
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Chapter 3
Qizhi Dai, Robert J. Kauffman
New technological innovations have made it possible for new intermediaries to create value in business processes that involve the procurement of... Sample PDF
Partnering for Perfection: An Economics Perspective on B2B Electronic Market Strategic Alliances
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Chapter 4
Nelson Granados, Alok Gupta, Robert J. Kauffman
Internet-based selling offers firms many new opportunities regarding the strategies for design of mechanisms to support consumer transactions. This... Sample PDF
Transparency Strategy in Internet-Based Selling
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Chapter 5
Kexi Zhao, Michael J. Shaw, Mu Xia, Chandrasekar Subramaniam
This chapter analyzes the structural dynamics of multilateral business-to-business (B2B) relationships based on game theoretical approach. It... Sample PDF
Structure Evolution of B2B Enterprise Networks
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Chapter 6
Xiaorui Hu, Zhangxi Lin, Han Zhang
Escrow is an emerging trust service in online consumer-to-consumer auction markets in preventing Internet fraud. This chapter studies the effect of... Sample PDF
Perceived Risk and Escrow Adoption in Online Consumer-to-Consumer Auction Markets: An Economic Analysis
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Chapter 7
Pekka Tsupari, Petri Rouvinen
This chapter studies the joint effects of inter-firm collaboration and electronic business on firm profitability primarily in Finnish manufacturing.... Sample PDF
Inter-Firm Collaboration and Electronic Business: Effects on Profitability in Finland
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Chapter 8
Ranjan Dutta, Jonathan J. Koehler
In this chapter, we draw on the behavioral economics literature to identify the conditions under which consumers would prefer one of three pricing... Sample PDF
Pay Now or Later? The Impact of Temporal Separation of Payments and Consumption on Consumer Payment Preferences
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Chapter 9
Kerem Tomak
In this chapter we attempt to build a bridge between mobile commerce and the emerging field of behavioral economics. We first provide examples from... Sample PDF
Economics of Immediate Gratification in Mobile Commerce
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About the Authors