IDEAS home Printed from https://ideas.repec.org/a/inm/orisre/v16y2005i1p47-60.html
   My bibliography  Save this article

Competition Among Sellers in Online Exchanges

Author

Listed:
  • Subhajyoti Bandyopadhyay

    (Warrington School of Business, University of Florida, Gainesville, Florida 32611)

  • John M. Barron

    (Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana 47907)

  • Alok R. Chaturvedi

    (Krannert Graduate School of Management, Purdue University, West Lafayette, Indiana 47907)

Abstract

With the advent of the Internet, and the minimal information technology requirements of a trading partner to join an exchange, the number of sellers who can qualify and participate in online exchanges is greatly increased. We model the competition between two sellers with different unit costs and production capacities responding to a buyer demand. The resulting mixed-strategy equilibrium shows that one of the sellers has a normal high price with random sales, while the other seller continuously randomizes its prices. It also brings out the inherent advantages that sellers with lower marginal costs or higher capacities have in joining these exchanges, and provides a theoretical basis for understanding the relative advantages of various types of sellers in such exchanges.

Suggested Citation

  • Subhajyoti Bandyopadhyay & John M. Barron & Alok R. Chaturvedi, 2005. "Competition Among Sellers in Online Exchanges," Information Systems Research, INFORMS, vol. 16(1), pages 47-60, March.
    • Handle: RePEc:inm:orisre:v:16:y:2005:i:1:p:47-60
    DOI: 10.1287/isre.1050.0043
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/isre.1050.0043
    Download Restriction: no
    File URL: https://libkey.io/10.1287/isre.1050.0043?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    2. Dan Kovenock & Raymond J. Deneckere, 1996. "Bertrand-Edgeworth duopoly with unit cost asymmetry (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 1-25.
    3. Frederick J. Riggins & Charles H. Kriebel & Tridas Mukhopadhyay, 1994. "The Growth of Interorganizational Systems in the Presence of Network Externalities," Management Science, INFORMS, vol. 40(8), pages 984-998, August.
    4. Boyd, John H. & Prescott, Edward C., 1986. "Financial intermediary-coalitions," Journal of Economic Theory, Elsevier, vol. 38(2), pages 211-232, April.
    5. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 1-26.
    6. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 27-41.
    7. Elena Katok & Alvin E. Roth, 2004. "Auctions of Homogeneous Goods with Increasing Returns: Experimental Comparison of Alternative "Dutch" Auctions," Management Science, INFORMS, vol. 50(8), pages 1044-1063, August.
    8. Anitesh Barua & Byungtae Lee, 1997. "An Economic Analysis of the Introduction of an Electronic Data Interchange System," Information Systems Research, INFORMS, vol. 8(4), pages 398-422, December.
    9. Amnon Rapoport & Terry Daniel & Darryl Seale, 1998. "Reinforcement-Based Adaptive Learning in Asymmetric Two-Person Bargaining with Incomplete Information," Experimental Economics, Springer;Economic Science Association, vol. 1(3), pages 221-253, December.
    10. Kevin Zhu, 2004. "Information Transparency of Business-to-Business Electronic Markets: A Game-Theoretic Analysis," Management Science, INFORMS, vol. 50(5), pages 670-685, May.
    11. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
    12. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anindya Ghose & Tridas Mukhopadhyay & Uday Rajan, 2007. "The Impact of Internet Referral Services on a Supply Chain," Information Systems Research, INFORMS, vol. 18(3), pages 300-319, September.
    2. Aron, Ravi & Ungar, Lyle & Valluri, Annapurna, 2008. "A model of market power and efficiency in private electronic exchanges," European Journal of Operational Research, Elsevier, vol. 187(3), pages 922-942, June.
    3. Li, Yung-Ming & Jhang-Li, Jhih-Hua, 2011. "Analyzing online B2B exchange markets: Asymmetric cost and incomplete information," European Journal of Operational Research, Elsevier, vol. 214(3), pages 722-731, November.
    4. Thomas A. Weber & Zhiqiang (Eric) Zheng, 2007. "A Model of Search Intermediaries and Paid Referrals," Information Systems Research, INFORMS, vol. 18(4), pages 414-436, December.
    5. Mahadevan, B. & Hazra, Jishnu & Jain, Tarun, 2017. "Services outsourcing under asymmetric cost information," European Journal of Operational Research, Elsevier, vol. 257(2), pages 456-467.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Yung-Ming & Jhang-Li, Jhih-Hua, 2011. "Analyzing online B2B exchange markets: Asymmetric cost and incomplete information," European Journal of Operational Research, Elsevier, vol. 214(3), pages 722-731, November.
    2. Blázquez de Paz, Mario, 2018. "Electricity auctions in the presence of transmission constraints and transmission costs," Energy Economics, Elsevier, vol. 74(C), pages 605-627.
    3. Vettas, Nikolaos & Biglaiser, Gary, 2004. "Dynamic Price Competition with Capacity Constraints and Strategic Buyers," CEPR Discussion Papers 4315, C.E.P.R. Discussion Papers.
    4. Hunold, Matthias & Muthers, Johannes, 2019. "Spatial competition and price discrimination with capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    5. Massimo A. De Francesco & Neri Salvadori, 2022. "Bertrand–Edgeworth oligopoly: Characterization of mixed strategy equilibria when some firms are large and the others are small," Metroeconomica, Wiley Blackwell, vol. 73(3), pages 803-824, July.
    6. Allison, Blake A. & Lepore, Jason J., 2014. "Verifying payoff security in the mixed extension of discontinuous games," Journal of Economic Theory, Elsevier, vol. 152(C), pages 291-303.
    7. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth equilibrium with a large number of firms," Discussion Papers 04-12, Indian Statistical Institute, Delhi.
    8. Lepore, Jason J., 2012. "Cournot outcomes under Bertrand–Edgeworth competition with demand uncertainty," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 177-186.
    9. De Francesco, Massimo A. & Salvadori, Neri, 2023. "Bertrand-Edgeworth game under oligopoly. General results and comparisons with duopoly," MPRA Paper 118237, University Library of Munich, Germany.
    10. Massimo A. Francesco, 2014. "A Dynamic Entry And Price Game With Capacity Indivisibility," Bulletin of Economic Research, Wiley Blackwell, vol. 66(4), pages 406-419, October.
    11. Bagh, Adib, 2010. "Variational convergence: Approximation and existence of equilibria in discontinuous games," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1244-1268, May.
    12. García Díaz, Antón & Hernán González, Roberto & Kujal, Praveen, 2009. "List pricing and discounting in a Bertrand-Edgeworth duopoly," International Journal of Industrial Organization, Elsevier, vol. 27(6), pages 719-727, November.
    13. De Francesco, Massimo A. & Salvadori, Neri, 2016. "Bertrand-Edgeworth games under triopoly: the equilibrium strategies when the payoffs of the two smallest firms are proportional to their capacities," MPRA Paper 69999, University Library of Munich, Germany.
    14. De Francesco, Massimo A. & Salvadori, Neri, 2015. "Bertrand-Edgeworth games under triopoly: the payoffs," MPRA Paper 64638, University Library of Munich, Germany.
    15. Blázquez de Paz, Mario, 2015. "Transmission Costs, Transmission Capacities and their Influence on Market Power in Wholesale Electricity Markets," Working Paper Series 1070, Research Institute of Industrial Economics, revised 16 Dec 2015.
    16. Thomas A. Weber & Zhiqiang (Eric) Zheng, 2007. "A Model of Search Intermediaries and Paid Referrals," Information Systems Research, INFORMS, vol. 18(4), pages 414-436, December.
    17. Bandyopadhyay, Subhajyoti & Barron, John M. & Chaturvedi, Alok R., 2008. "Capacity and entry issues in online exchanges," European Journal of Operational Research, Elsevier, vol. 185(2), pages 849-863, March.
    18. Raymond J. Deneckere & Dan Kovenock, 1988. "Capacity-Constrained Price Competition When Unit Costs Differ," Discussion Papers 861, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    19. Peralta, Susana & Wauthy, Xavier & van Ypersele, Tanguy, 2006. "Should countries control international profit shifting?," Journal of International Economics, Elsevier, vol. 68(1), pages 24-37, January.
    20. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth duopoly with linear costs: A tale of two paradoxes," Discussion Papers 04-13, Indian Statistical Institute, Delhi.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orisre:v:16:y:2005:i:1:p:47-60. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.