Electronic markets (or electronic marketplaces) are information systems (IS) which are used by multiple separate organizational entities within one or among multiple tiers in economic value chains. In analogy to the market concept which can be viewed from a macroeconomic (describing relationships among actors in an economic systems, e.g. a monopoly) as well as from a microeconomic (describing different allocation mechanisms, e.g. public auctions of telephone frequencies) perspective, electronic markets denote networked forms of business with many possible configurations:
First, the topology of electronic markets may be centralized or decentralized in nature. Centralized electronic markets are hubs which often provide services to their participants. Decentralized settings involve sequential relationships within value chains which often are found when electronic messages are exchanged directly between businesses (electronic data interchange, EDI).
Second, the services provided by electronic markets may serve infrastructural or allocation purposes. Among the infrastructure services are routing, messaging, identification and partner directories whereas allocation services enable pricing process which in turn may be static or dynamic in nature. Typical implementations are catalogs, exchanges and auctions.
Third, the relationships of actors involved in electronic markets may be stable or atomistic in nature. The former usually refers to classical supply chains where business collaborate during a longer period of time. In the latter case, the transaction partners are only stable for a single transaction. This is usually to be found in auction and other exchange settings.
This leads to two definitions: In a narrow sense Electronic Markets are mainly conceived as allocation platforms with dynamic price discovery mechanisms involving atomistic relationships. Popular examples originate from the financial and energy industries. In a broader sense, price discovery is not critical for electronic markets. This covers all forms of electronic collaboration between organizations and consumer as well as vice versa.
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Iowa Electronic Markets
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Prediction Markets
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>> Announcer: PREDICTING THE FUTURE IS A DIFFICULT TASK, BUT IN THE BUSINESS WORLD WE TRY WITH A MARKET KNOWN AS THE FUTURES EXCHANGE -- ESSENTIALLY FORECASTING WHAT THE PRICES OF VALUABLE COMMODITIES WILL BE IN THE FUTURE. BUT WHAT IF THE FUTURES-MARKET CONCEPT WAS APPLIED TO REAL-LIFE EVENTS? AT THE UNIVERSITY OF IOWA, RESEARCHERS HAVE DONE EXACTLY THAT WITH AN INNOVATIVE PROJECT CALLED THE IOWA ELECTRONIC MARKETS. THE IEM, AS IT IS KNOWN, IS A GROUP OF ONLINE FUTURES MARKETS OPERATED BY THE TIPPIE COLLEGE OF BUSINESS. LIKE AN ACTUAL EXCHANGE, THE IEM ALLOWS PARTICIPANTS TO TRADE STANDARDIZED FUTURES CONTRACTS -- AGREEMENTS TO BUY OR SELL A COMMODITY AT A POINT IN THE FUTURE FOR A SET PRICE. INSTEAD OF COMMODITIES, CONTRACTS IN THE IEM ARE BASED ON REAL-WORLD EVENTS LIKE CORPORATE EARNINGS, STOCK-PRICE RETURNS, AND, OF COURSE, ELECTIONS. PROFESSOR TOM RIETZ IS ONE OF THE RESEARCHERS OPERATING THE IOWA ELECTRONIC MARKETS. >> THE WAY WE STRUCTURE THE FUTURES MARKETS IN THE IEM IS WE SAY, "WELL, IN NOVEMBER, THERE'LL BE AN ELECTION. AND THAT ELECTION WILL RESULT IN A WINNER, AND THERE WILL BE A POPULAR VOTE SPLIT BETWEEN THE TWO." SO WE JUST TRADE A CONTRACT THAT PAYS OFF IN NOVEMBER, JUST LIKE A CORN-FUTURES CONTRACT WILL PAY OFF IN NOVEMBER, EXCEPT OURS ARE TIED TO THE ELECTION OUTCOME. >> Announcer: IN THE 2008 ELECTION, THE IEM PREDICTED THE FINAL VOTE COUNT TO WITHIN HALF A PERCENTAGE POINT. IN COMPARISON TO MORE THAN 900 POLLS OVER THE LAST TWO DECADES, THE IEM HAS BEEN CLOSER TO THE ACTUAL OUTCOME 74% OF THE TIME. IOWA'S POLITICAL SCIENCE DEPARTMENT, WHICH PIONEERED ELECTION FORECASTING, ACKNOWLEDGES THE ACCURACY OF THE IEM. >> IT'S A MARKET STRATEGY. IT'S A TRADING MARKET. NOW THERE'S MORE THAN ONE. THE IEM WAS THE FIRST. IT'S THE BEST. YOU TAKE THE FINAL IEM FORECAST, THE FINAL GALLUP FORECAST -- THE IEM IS BETTER. >> Announcer: WHILE THE IEM WOULD APPEAR MORE ACCURATE THAN POLLS, IOWA SCHOLARS BELIEVE POLLS CAN BE MISINTERPRETED. >> POLLSTERS ARE TRYING TO MEASURE CURRENT OPINION AND THE EBB AND FLOW OF CURRENT OPINION THROUGH TIME. THEY'RE NOT NECESSARILY TRYING TO FORECAST THE ELECTION. >> POLLS ARE REALLY VOLATILE. AND THAT VOLATILITY IS ARTIFACTUAL. IT'S NOT REAL. IT'S REALLY NOT PUBLIC OPINION IS CHANGING THAT MUCH EVERY DAY. >> Announcer: RESEARCHERS POINT TO THE WAY THE PREDICTION MARKETS AGGREGATE TRADER INFORMATION AS ONE REASON FOR THEIR ACCURACY. >> THE NICE THING ABOUT THE ELECTION MARKET THAT WE RUN IS THAT THERE'S SORT OF AN AUTOMATIC MECHANISM FOR GETTING RID OF BIASES. IF A TRADER COMES INTO OUR MARKET AND THEY'RE HEAVILY BIASED, WHAT THEY TYPICALLY DO IS THEY COME IN AND THEY SPEND THEIR ENTIRE BUDGET ON THAT CANDIDATE'S CONTRACTS, AND THEN THEY HOLD THEM UNTIL THE ELECTION. SINCE THEY'VE STOPPED TRADING, THEY'VE STOPPED SETTING THE MARKET PRICES THAT WE USE AS OUR FORECAST. WHAT WE'VE NOTICED IS THAT THE PEOPLE THAT BUY AND SELL CONTINUOUSLY, THAT ARE ALWAYS SETTING BIDS AND ASKS, THAT ARE TRADING BACK AND FORTH TEND TO BE UNBIASED. >> Announcer: CURT HUNTER, DEAN OF THE TIPPIE COLLEGE OF BUSINESS AT IOWA, SAYS THE PROMISE OF THE IEM GOES FAR BEYOND POLITICAL FORECASTING. >> THESE MARKETS ARE REALLY INTERESTING BECAUSE THEY ELICIT INFORMATION THAT YOU WOULD NOT NORMALLY GET BY JUST TAKING A POLL. WE'RE NOT EVEN AWARE OF ALL THE APPLICATIONS THAT THESE MARKETS COULD HAVE. >> WE'RE WORKING IN A VARIETY OF AREAS -- REVENUES OF NEW PRODUCTS, THE FLU, ELECTIONS. WE'VE EVEN RUN MARKETS ON WHERE HURRICANES WILL STRIKE. WE'RE SORT OF AT THE CUTTING EDGE OF FORECASTING. >> Announcer: WITH A 20-YEAR HISTORY, THE IEM IS AN ENDURING SYMBOL OF IOWA'S STRENGTHS IN FINANCE, ECONOMICS, AND POLITICAL AND SOCIAL SCIENCES. >> IT WAS A NATURAL THING FOR US. I MEAN, THIS IS WHERE GALLUP DID HIS TRAINING. THIS IS SORT OF THE ORIGIN OF SCIENTIFIC POLLING. >> WE ARE THE FORECASTING WORLD. IF YOU WANT TO STUDY THIS, THIS IS THE PLACE TO COME. >> Announcer: TODAY THE IEM CONTINUES TO BE A VALUABLE TEACHING AND RESEARCH TOOL. >> AT A BASIC LEVEL, THIS REALLY ENGAGES THE STUDENTS. >> IT ALLOWS US TO USE IT AS A TEACHING TOOL, WHERE WE CAN BRING TOGETHER OUR STUDENTS AND OUR FACULTY AROUND THESE DIFFERENT EVENTS TO TALK ABOUT HOW YOU MIGHT FORECAST IN A MORE INFORMATIVE AND ACCURATE WAY. SO THIS RELATES TO OUR MISSION AS A COLLEGE IN INTEGRITY, INNOVATION, AND IMPACT, AND I THINK THIS IS AN EXAMPLE OF AN APPLICATION COMING OUT OF THE COLLEGE THAT HITS IT ON ALL THREE LEVELS. >> Announcer: TO LEARN MORE ABOUT TIPPIE COLLEGE OF BUSINESS AND THE IOWA ELECTRONIC MARKETS, VISIT biz.uiowa.edu/iem.
Examples
- company websites that serve communication and transaction purposes
- electronic purchasing systems on EDI-basis as well as based on catalogs
- systems that support the configuration of products, such as car configurators
- automated download of product information based on the scan of an article number
- activation of an emergency chain based on the monitoring of heart frequency
- websites that link consumers, such as recommendation communities
Impacts on business efficiencies
Electronic markets are attributed important impacts on business efficiencies. From an industry perspective, transaction cost economics were used to illustrate the relationship between electronic markets and electronic hierarchies. While the former are in line with the narrow electronic markets definition, the latter are also included in the broader definition. This may be explained since in reality electronic markets have emerged as platforms which combine several modes of governance or types of coordination mechanisms. These “all-in-one-markets” link the possibility of competitive bidding for price discovery with the advantages of a predictable relationship to encourage relationship specific investments (non-contractible issues) and functionalities for closer collaboration. This perspective shows that it is important to distinguish between the market platform itself which creates an infrastructure between multiple parties and the coordination mechanisms operated on this platform which might be market-like or hierarchical in nature.
Advantages and disadvantages
Advantages
- Wide range of goods and services: E-markets offer a huge range of goods and services available for purchase. Users can easily search and compare different options to choose the most suitable one for their needs.[1][2]
- Convenience and accessibility: E-markets are available 24/7, allowing shoppers to shop anytime and from anywhere.[3]
- Cost Reduction: Electronic marketplaces reduce the cost of store rent and staff pay, which can result in lower prices for consumers.[4]
Disadvantages
- Lack of physical contact: One of the major disadvantages of electronic marketplaces is the lack of physical contact between buyer and seller. This can create some uncertainty and dissatisfaction among buyers, especially when buying goods that require groping or trying on.[5]
- Fraud Risk: Electronic marketplaces are prone to fraud risk as buyers and sellers may be anonymous and have no physical contact. This can result in losing money or receiving poor quality goods.[6][7]
- Data Protection: When shopping on e-marketplaces, users provide their personal information such as credit card numbers and shipping addresses.
- Limited access for some groups: Some people may have difficulty using e-markets due to lack of internet access or lack of skills in using online platforms.
References
- ^ "E-commerce Defined: Types, History, and Examples". www.investopedia.com. Retrieved 2023-12-06.
- ^ "What Is E-Commerce? Definition, Types & Getting Started". www.forbes.com. Retrieved 2023-12-06.
- ^ "The History of 'Available 24/7': The Evolution of Round-the-Clock Accessibility". myscres.com. Retrieved 2023-12-06.
- ^ "The Ecommerce Revolution: The Rise of the Online Marketplace". www.danbennun.com. Retrieved 2023-12-06.
- ^ "E-Commerce. Definition, Types, Features, Advantages & Disadvantages". www.toppers4u.com. Retrieved 2023-12-06.
- ^ "Common types of ecommerce fraud and how to prevent them". www.paypal.com. Retrieved 2023-12-06.
- ^ "57 Crucial eCommerce Fraud Statistics for 2023: Types, Cost & Protection Data". financesonline.com. Retrieved 2023-12-06.
- Alt, R. and S. Klein (2011). "Twenty Years of Electronic Markets Research – Looking Backwards towards the Future." Electronic Markets 21(1): 41-51.
- Kaplan, S. and M. Sawhney (2000). "E-Hubs: The New B2B Marketplaces." Harvard Business Review 78(3): 97-103.
- Malone, T. W., J. Yates, et al. (1987). "Electronic Markets and Electronic Hierarchies." Communications of the ACM 30(6): 484-497.
- Österle, H. and B. Schmid (2008). "Quo Vadis Electronic Markets?" Electronic Markets 18(3): 206-210.
- Standing, S., C. Standing, et al. (2010). "A Review of Research on E-Marketplaces 1997-2008." Decision Support Systems 49(1): 41-51.
This page was last edited on 28 April 2024, at 16:55