Information Asymmetry
COMP 690 E-commerce
Fall 2006
Quiz 1—Solutions
The first two problems together are equal in value to the third problem. Total points possible: 20 1 (5 pts.). What is information asymmetry? What was its role in the vision of Ecommerce I, and how does it hold up in the reality of E-commerce II? Answer Information asymmetry exists when some market participants have information not available to other market participants. The usual case is where merchants and manufacturers know their true costs, profits, and price discrimination strategies while consumers have only vague ideas of figures and strategies. E-commerce I was supposed to reduce information asymmetry since it was supposed to make information available in ways and volumes not previously possible. In E-commerce II, there is considerable persistent price dispersion, brands remain very important, and the ideal of very efficient markets has not come to pass. All these factors have allowed merchants and manufacturers to introduce information asymmetries if only because factors not readily available via the Internet now contribute so much to costs and profits. 2 (5 pts.). What is the traditional relation between the richness and the reach of a marketing message? How have e-commerce technologies changed this? Answer Before the Web, there was a tradeoff between the richness and the reach of a message: richer messages had less reach, and messages with more reach had to sacrifice richness. The Web, however, has abolished this tradeoff (at least once we go beyond relatively narrow reach) since marketing messages with complex content (such as text, video, and audio) can reach audiences of millions.
COMP 722 E-commerce
Fall 2006
Quiz 1—Solutions
3 (10 pts.). The following HTML document is listed with gaps (which you will fill in). Its rendering is shown at right. The body of the document consists first of a div element occupying 60% of the width of the screen that floats right and has style class
Fall 2006
Quiz 1—Solutions
The first two problems together are equal in value to the third problem. Total points possible: 20 1 (5 pts.). What is information asymmetry? What was its role in the vision of Ecommerce I, and how does it hold up in the reality of E-commerce II? Answer Information asymmetry exists when some market participants have information not available to other market participants. The usual case is where merchants and manufacturers know their true costs, profits, and price discrimination strategies while consumers have only vague ideas of figures and strategies. E-commerce I was supposed to reduce information asymmetry since it was supposed to make information available in ways and volumes not previously possible. In E-commerce II, there is considerable persistent price dispersion, brands remain very important, and the ideal of very efficient markets has not come to pass. All these factors have allowed merchants and manufacturers to introduce information asymmetries if only because factors not readily available via the Internet now contribute so much to costs and profits. 2 (5 pts.). What is the traditional relation between the richness and the reach of a marketing message? How have e-commerce technologies changed this? Answer Before the Web, there was a tradeoff between the richness and the reach of a message: richer messages had less reach, and messages with more reach had to sacrifice richness. The Web, however, has abolished this tradeoff (at least once we go beyond relatively narrow reach) since marketing messages with complex content (such as text, video, and audio) can reach audiences of millions.
COMP 722 E-commerce
Fall 2006
Quiz 1—Solutions
3 (10 pts.). The following HTML document is listed with gaps (which you will fill in). Its rendering is shown at right. The body of the document consists first of a div element occupying 60% of the width of the screen that floats right and has style class