E-commerce: Economic and Social Aspects

E-commerce is technology-enabled buying and selling that occurs over telecommunications networks such as the Internet. As in physical marketplaces, these exchanges can occur between businesses, between a business and a consumer, or even between consumers. E-commerce has grown dramatically since the late 1990s. This transition from traditional physical marketplaces to technology-enabled ones has important economic and social implications.

One significant economic effect is the reduction of transaction costs compared to traditional commerce. In the 1930s economist Ronald Coase defined transaction costs as the costs associated with organizing a transaction, starting with searching for a product, then negotiating for a price, and finally making the exchange. E-commerce reduces transaction costs by removing many of the geographic and time barriers that buyers and sellers previously faced. Customers who had to drive to a physical store location during business hours, park, and...