In this article, contrary to popular belief, it is argued on the basis of Transaction Cost Economics that consumers will become dependent subcontractors on electronic markets. Consumers invest time and effort building up a relation with a producer or e-tailer; an investment that is idiosyncratic. The producer or e-tailer only needs to invest in generic assets that enable him to automate the process of collecting and processing customer information she needs to differentiate products and discriminate prices. As subcontractors consumers face high switching costs and are thus dependent on producers or e-tailers. Virtual communities of consumers that organize countervailing power will not mitigate this tendency.

consumers, consumers as subcontractors, electronic, electronic markets, transaction cost
Business Administration and Business Economics; Marketing; Accounting (jel M), New Firms; Startups (jel M13), Marketing (jel M31), Management of Technological Innovation and R&D (jel O32)
Erasmus Research Institute of Management
hdl.handle.net/1765/1932
ERIM Report Series Research in Management
ERIM report series research in management Erasmus Research Institute of Management
Erasmus Research Institute of Management

Dolfsma, W.A. (2005). Collective Consuming: Consumers as Subcontractors on Electronic Markets (No. ERS-2005-020-ORG). ERIM report series research in management Erasmus Research Institute of Management. Erasmus Research Institute of Management. Retrieved from http://hdl.handle.net/1765/1932