The passage that I find most interesting in the reading is on how book prices listed by multiples of websites still differ even though the Internet has rendered the searching costs nearly zero, and prices are expected to be the same for identical product. The author attributes this phenomenon to the concern about quality, which is an implicit application of need for information. Given the lacking knowledge on the quality of the same product from different sellers, consumers are willing to pay higher prices in order to obtain the product with the highest quality from the most trust-worthy provider. The differences in the product quality has made the supposedly-identical product differentiable, as an indirect result of lack of information. This idea exceedingly appeals to me, since it resolves my long-standing puzzle about the continuous difference in prices for a same good in such a nearly perfectly competitive market as the Internet. This is definitely a most reasonable explanation for my question.
By transaction cost, the author refers to the costs incurred by consumers to search for the lowest price. For example, without knowledge on the price of a laptop computer on average, consumers will have to do research before they can land a seller who offers the computer at the lowest price. The searching process takes time and money. This comes to the consumers as a transaction cost.
When information is unevenly distributed, sellers are able to charge the buyers a higher price for the goods they are selling, because the buyers are not able to compare prices in the market, unless they pay the transaction costs. This makes the sellers a winner in the trade, because they gain higher revenue from every single buyer. In return, buyers lose in the trade, since they are forced to pay a higher price, given the lack of information.
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