e-market place and prospects
- This is a preview of the essay.
To view the full text you must login!
Economics of Information
"Economics is concerned with the efficient use of limited productive resources for the purpose of attaining the maximum satisfaction of our material wants" (Jackson and McConnell, 1985, p3) Classic economic theories and analysis is based on the assumption of economic agents having full information about:
1) the goods or services being bought or sold
2) each other.
This assumption of perfect information is idealistic in the real world. E.g. consumers do not know how much a particular good sells for in every store. The theory of decision making in contrast, recognizes the multiplicity of goals and the pervasiveness of uncertainty in the real world of management. (WW Haynes, Managerial Economics: Analysis and Cases) It identifies the costs of collecting and processing information, the problem of communication and the need to reconcile the diverse object of individual and interests in the organization.
There is imperfect information in markets, for reasons such as accurate information being too costly, or impossible to obtain.
Stigler (1961) states that "information is a valuable resource: knowledge is power"(p.213) Therefore because information can determine actions, it is also a valuable economic factor, especially in the allocation of scarce economic resources, and the level of uncertainty that can ultimately determine utility levels (Nicholson, 1998)
The famous Ronald Coase is renowned for his work on defining the nature of the firm...