Business - Written Friday, September 12, 2008 by Paul Artiuch - 0 Comments

Crowdsourcing towards market efficiency

Economic theory suggests that the workings of a market can become more efficient with the increase in available information. Essentially this means that a price differential between similar goods can not persist if all customers that have access to the good are aware of it.

Price comparison sites such as NexTag, BizRate, Shopzilla and Yahoo! Shopping already help users find the best deals by comparing retailers. However, most of these sites only include prices from online sources as opposed to physical stores. Some physical retailers have begun to put their inventory and price information online, however, comparison between them is usually cumbersome. (Not to mention the frequent inaccuracies)

Other forays into the physical world include Craigslist and eBay mashups which place real-estate, used cars and other goods on a map. These services are excellent in helping people locate things, but do little to make the markets for similar goods more efficient. Japan is one of the countries ahead of the curve. A shopper can use their mobile phone to scan QR codes on items like books and compare them to online retailers such as Amazon.

Perhaps the best example of sharing useful information on physical goods is GasBuddy.com, a website that compiles gas prices in the U.S and Canada. Volunteers text or go online to enter prices for gasoline and diesel at fuel stations in their area. The work of thousands of volunteers creates a price map that can be accessed online or though a mobile phone. Although this is unlikely to equalize gas prices across the country, local differences are less likely to persist. The maps also give analysts and regulators a better picture of the differentials across the country.

As the internet, and increasingly mobile technologies, allow people to compile information on various goods and services, the pricing power will slowly shift from sellers to buyers. Buyers in a given area essentially begin to act as one. This shift could have a profound effect on the retail industry.