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Oligopolisic Business-to-Business E-Market and Welfare

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  • Aoki, Reiko

Abstract

We examine the effect of an oligopolistic upstream electronic market on upstream and downstream prices. The analysis highlights the two sources of competition that a firm that source from an electronic market (e-market firm) face: competition with less efficient firms that source traditionally (t-market firms) and competition among e-market firms. When size of the upstream e-market is small, the first effect dominates and there is higher profits with lower upstream prices in the e-market. When size of the emarket becomes very large, the second effect makes e-market firms less profitable than t-market firms even though e-market price may start to increase (as market size increases). As consequence, e-market will never completely eliminate the upstream t-market and downstream price can increase when e-market grows beyond a certain size.

Suggested Citation

  • Aoki, Reiko, 2001. "Oligopolisic Business-to-Business E-Market and Welfare," Working Papers 155, Department of Economics, The University of Auckland.
    • Handle: RePEc:auc:wpaper:155
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    File URL: http://hdl.handle.net/2292/155
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