Economics of information in the Web economy - Towards a new theory?

As a shopping interface, the Web possesses certain unique attributes, which necessitates a reevaluation of the implications and validity of traditional theories of consumer behavior. Because the acquisition and management of information is drastically different in an online setting, traditional theories of information search behavior might have to be modified to suit the Web environment. This article examines how two key aspects of the traditional Economics of Information (EoI) theory, price dispersion and search efficiency, are likely to be impacted differentially due to the characteristics of the Web. A set of theoretical propositions is presented, which suggests that the Web will influence our views of the traditional EoI theory in the areas of product/information versioning, antecedents of price dispersion, relationship between price dispersion and amount of search, role of search agents and the effect of search efficiency on search behavior. (C) 2002 Elsevier Inc. All rights reserved.