AI agents—autonomous systems that perceive, reason, and act on behalf of human principals—are poised to transform digital markets by dramatically reducing transaction costs. This chapter evaluates the economic implications of this transition, adopting a consumer-oriented view of agents as market participants that can search, negotiate, and transact directly. From the demand side, agent adoption reflects derived demand: users trade off decision quality against effort reduction, with outcomes mediated by agent capability and task context. On the supply side, firms will design, integrate, and monetize agents, with outcomes hinging on whether agents operate within or across platforms. At the market level, agents create efficiency gains from lower search, communication, and contracting costs, but also introduce frictions such as congestion and price obfuscation. By lowering the costs of preference elicitation, contract enforcement, and identity verification, agents expand the feasible set of market designs but also raise novel regulatory challenges. While the net welfare effects remain an empirical question, the rapid onset of AI-mediated transactions presents a unique opportunity for economic research to inform real-world policy and market design."
Click here for the entire paper. Excerpt:
"The broad adoption of AI agents will cause transformative downstream effects on the economy. Although the exact nature of these changes remains uncertain, the forces at play are familiar to economists: supply and demand of AI agents will continue to shape market organization, while technological change alters the relative costs of different activities. To see how these forces might operate, Coase’s (1937) insight that transaction costs play a central role in shaping organizations is particularly useful. One could argue that much of how we structure our economy and firms can be explained by transaction costs, often costs of human labor. The activities that comprise transaction costs—learning prices, negotiating terms, writing contracts, and monitoring compliance—are precisely the types of tasks that AI agents can potentially perform at very low marginal cost. Once agents can indeed execute these functions effectively and cheaply, we will see significant shifts in the traditional make-or-buy boundaries that define firm organization and market structure."
Here is a table from the paper:
Click here to read about Ronald H. Coase. "Ronald Coase received the Nobel Prize in 1991 “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.”"
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