1Switching Cost, Market Effects and the Pricing Model of e-Commerce

Our paper develops a Walrasian general equilibrium model based on impersonal networking decisions to investigate the role of switching cost, trading efficiency and fixed learning cost in a competitive market of e-Commerce. Since the general equilibrium in our model is always Pareto optimal as long as nobody can block free entry into any sector and nobody can manipulate relative prices and numbers of specialists, the implications of our model is straightforward that if the e-Commerce market is efficient and with lower switching cost, it ensures that network effects of division of labor can be fully exploited and the real income will improve, yet the relative price in term of e-Commerce service will be cheaper. To business practitioners, our model suggests that successful transformation from conventional commerce to e-Commerce service is a key for business viability in the future business environment. I