Deanna L. Sharpe’s Comments on Three Papers

Deanna L. Sharpe’s Comments on Three

Cyberspace Panel- Discussion

American Council on Consumer Interests, 1996

Nashville, Tennessee

These discussions of cyber-commerce remind me that over 20 years ago, Alvin Toffler labeled his predictions of
an information based economy, commerce by computer, the electronic cottage, and an information underclass Future
. That future is now. A recent USA Weekend spotlighted Blacksburg, Virginia as USA’s “most wired town”
(Diamond, 1996). Nearly 60% of this town of 35,000 is connected by computer to each other, city businesses and
services, and the world. The town’s web address is posted on the same sign that announces the town’s name and
current population. At least 18 new businesses have been launched on-line. This electronic village has spawned, not
shock, but new ways to shop, meet others, exchange information. It also highlights the fact that consumers face
choices, change, and challenges in this new “cyber-marketplace.”

Connie Kratzer’s presentation introduced us to the number of users on the internet and the variety of activities
that they pursue on line. We were also made aware of the major issues of equity, privacy, security, and access.

Sherman Hanna focused on commerce and consumer protection in cyberspace and let us know that some
consumer issues transcend both time and place. Over 100 years ago, unscrupulous salespeople took advantage of
consumer ignorance and hawked products pandering to consumer lust, greed, and hope. The internet changes the
place, but not this sales practice.

Other consumer problems arise from characteristics of the internet, itself. With nearly 1 million web pages,
consumers face an overwhelming amount of choice. The internet is a fluid medium in constant flux. Evidence of
fraud is hard to find when the origin of a home page can be quickly changed. Borderless exchange can occur across
state and national lines. When a consumer is dissatisfied, who is to blame and who is to be held accountable?

The federal government has limited powers to deal with problems arising from international commerce. Given
the large and growing number of web pages, the cost of directly policing the web could be prohibitive. But, would
such policing be desirable? Recent outcry against possible government regulation of sexually oriented material on
the web as an infringement of free speech made it clear there are very divergent views regarding both the what and
how of regulation on the web.

If the federal government can offer little help to the consumer, will those businesses that provide access to the
web act as consumer advocate? If the history of the market system in America is any guide, the likely answer is no –
unless and until it proves to be in their best business interests (read generates higher profit or larger market share) to
do so.

Education has often been a strong defense for consumers facing a beguiling marketplace. But, the problem here
is not that internet users are uneducated. In fact, they tend to be highly educated and to have relatively high incomes.
They are not the group we would usually assume would have problems in the marketplace. This market, however, is
unlike any other. The internet presents a fundamentally different forum for exchange. This market is highly
impersonal, accountability for product failure is difficult or impossible to establish, and the usual guides to quality
(the consumer’s own senses and/or rating services) are absent. In the cyber-market, the rules of exchange are still
being made. And, that is a problem.

As Alice Simon pointed out, the usual rule consumers use in the marketplace is to equate marginal costs with
marginal benefits. But, this rule may not work in this context. There are high costs, both direct and marginal, to
enter the cyber-market. One must purchase or have access to a computer, a modem, and an internet link. Then, one
must know how to use this equipment. For some, the fear of computers presents a formidable barrier to entry into
the cyber-market. Once connected, smooth travel is not guaranteed. As Walter S. Mossberg pointed out in a recent
Wall Street Journal article, members of a technological elite produce, direct, and advance the new technology – using
equipment most mortals don’t possess (Mossberg, 1996). For the rest of us, arcane instructions for equipment
configuration, poor service by internet link providers, slow response rates, unreliable connections, interminable
download times and an often closed and arrogant on-line culture can quickly turn the information highway into a
muddy bog.

To complicate the marginal rule, the benefits of internet search are often hard to measure. When the system
works well and exchange of information or products via the web is successful, the marginal benefits are positive.
But, when a web search generates an overwhelming amount of information, much of it irrelevant, or when dead links
abound, a searcher can experience a marginal detriment. Further, it is often difficult to know when to quit a given
search. Like the ever-hopeful gambler who just knows that next bet will win the million dollars, the web searcher
hopes the next search attempt will yield really useful information. From experience, I’d say that hope gets larger the
longer the search has been pursued. There is an issue of “sunk costs” here that economists might like to explore!

Concerns raised almost two decades ago by Toffler that technology would lead to an information underclass still
exist. A recent article released by the Associated Press indicated that although 50% of the nation’s public schools
are linked to the internet, low income students are less likely than high income students to have web access in the
classroom (Survey, 1996). Results of Alice Simon’s study also suggest there are some major differences between
users and nonusers of computer technology. Movement toward an information based economy coupled with the
explosive growth of the internet presents society with several questions. Should all in society have equal access to
computers and to the internet? What social values should be used as a basis for both public and private choice
regarding internet use? Who is responsible for providing computer access to all? When does information become a
commodity? Is the information available over the web a private good or public good? When information is free, do
we get just what we pay for?

Clearly, the presence of the internet changes the market consumers face in fundamental ways. At present, we
don’t know the full result of these changes. We are not only learning but creating a new culture. Professionals
interested in consumer welfare have a valuable opportunity to help shape this culture in beneficial ways. Until we do
this, we will continue to say:

Oh, what a tangled web we weave

when info from the web we try retrieve.


Diamond, D. (1996, February 23-25). This town is wired. USA Weekend, pp. 4-6.

Mossberg, W. S. (1996, February 22). Going on-line is still too difficult to lure a mass audience. The Wall Street
, p. B1.

Survey: Half of U.S. schools tied to Internet. (1996, February 16). Columbia Daily Tribune, p. 5a

Toffler, A. (1970). Future Shock. New York: Random House.