Question

Chapter 1 1. What is a network effect and why is it valuable? 2. What is information asymmetry? Describe how has it changed or stayed the same with the advent of e-commerce 3. What are the unique features of e-commerce technology? Describe the basics of each feature and how it relates to e-commerce.

Answer 1

1.Network effect is the positive value added over a good or service with an increase in number of its user. In other words, in network effect, the value of goods or services increases with increase in its users.

It is valuable as it let's us know about the utility and demand of one particular product.

2. Information Asymmetry is a condition in economics where one party has better knowledge about the goods than the other.

The asymmetry is still there but the things are more at ease at e-commerce accepts easy returns and replacements.

3. Unique features of e-commerce technology are:-

Ubiquity- thousands of people can access it at the same time

Global Reach- our choices aren't limited to any place anymore.

Universal Standards- e-commerce sites have universal standards and hence take the responsibility as well

Richness- richness of options.

Interactivity- the whole digital media interface is interactive.

Information Density- variety of information is available

Personalization.- e-commerce experiences are highly personalised.