Today's mental mashup puts together Alex Bosworth on Google: In your business, taking your money, and Masood Mortazavi on Transaction Costs and Search.
As Alex points out, there is clearly a difference between the following search outcomes:
- finding the best (cheapest, fastest, highest quality) supplier - from a complete and perfect search
- finding a good enough supplier from an incomplete and imperfect search
- finding the supplier that has the highest advertising budget - in other words, the one that is paying Google the most money
These are questions that economists should understand. But what about the following outcomes?
- finding the supplier that meets your preconceptions of the requirement
- finding the supplier that meets Google's preconceptions of the requirement
- finding a supplier than can meet the requirement
In service-oriented world, as Rocky Lhotka pointed out recently, the transaction costs are dominated by questions of semantics. See my post on Semantic Coupling.
I should very much like to see an economic analysis of these semantic questions, but I somehow doubt whether this analysis is going to come from neoclassical economics.