Market Overview

Cognitive Costs Within Electronic Markets



Electronic markets have seen unprecedented growth in the last few years, and the outlook for the current year looks positive too. As per a report, stock market transactions involving mobile phones doubled in 2013.

While there are fundamental key indicators within the market that are used to evaluate the forecast, the notion of ‘cognitive cost’ has vastly been underestimated. Despite of the pervasiveness of investors to approach the electronic market, less is known about the impact of user interfaces (UI). UIs are important for promoting effective performance in the current market.

UIs and cognitive cost

Electronic markets, which include smartphone and mobile markets, are a tad different in the sense that they offer a very large number of choices. This can be seen with the digital content offered by e-retailers growing exponentially in size. This could lead to a complex market with unfamiliar variables.

UIs are very strongly linked to cognitive costs, a monetary metric that is incurred when people process information. The notion to understand here is that due to the ‘wealth’ of choices that are on offer, the consumer loses focus. So, investors should look at reviewing ‘choice architecture’ while pursing the digital market.

With respect to the mobile market, the market UI can be defined by two important parameters. The first parameter is about the information being targeted at the user and, secondly, the level of choices. An optimal market UI is obtained when the ‘behavioral’ model is employed to incentivize the choice making.

Cognitive costs are important in digital markets because users allocate time for a decision making task. As per the principles of cost benefit analysis, the amount of ‘time’ becomes an important monetary factor for users.

In the current scenario, information security and protection is a massive incentive. In light of surveillance outbreaks and security threats, tablet software security for mobile devices and improved protection models are required. Not only does it help in keeping cognitive costs low, but it also reduces the decision-making time.  

Another area that investors should understand is that within the digital market, the cognitive cost calculation is different from those in traditional models. The traditional model of UI and cognitive costs assume agents (users) have unlimited time and resources. Adjustments should be made while calculating these costs in the electronic market. Deliberation of this sort would allow better market retention and enhanced customer satisfaction.

Improvement in decision making

The notion of ‘behavioral modeling’ has been acknowledged by researchers of the digital market. It has been shown that ‘visual attention’ within mobile markets is directly related to the quality of information provided.

Using a cognitive cost analysis, a better evaluation of mobile markets can be made. Another key area of difference between the digital and conventional market is the impact of decision making. The electronic market offers a large number of low valued commodities (apps, content, games, etc.). In such cases, the UI is not decided by individual decisions but by the repeated decisions of numerous people.

Another step is the personalization of market UIs. One edge that digital markets have over traditional ones is that they have a treasure trove of information about individual market participants. This can be used to generate tailor made UIs, enhancing the customer satisfaction.

The notion of cognitive costs and User Interfaces should be a primary focus of digital markets. It would help the market move through bottlenecks and reduce costs in various customer related functions. 


The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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