This slide introduces digital markets and discusses the effects of digital markets on the ways companies conduct business. Ask students to define the terms listed here, and also to explain how each of these effects (lowered information asymmetry, etc.) are created by digital markets.
Information asymmetry: when one party in a transaction has more information that is important for the transaction than the other party
Search costs: The effort to find suitable products
Transaction costs: The cost of participating in a market
Menu costs: Merchants’ costs of changing prices
Price discrimination: Selling the same goods, or nearly the same goods, to different targeted groups at different prices.
Dynamic pricing: The price of a product varies depending on the demand characteristics of the customer or the supply situation of the seller
Disintermediation: The removal of organizations or business process layers responsible for intermediary steps in a value chain