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Duopolistic Competition between Independent and Collaborative Business-to-Business Marketplaces

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  • Kai Sülzle

Abstract

This paper studies imperfect price competition between two intermediaries in an electronic business-to-business matching market with indirect network externalities. The intermediaries differ with regard to their ownership structure: an independent third party incumbent marketplace competeswith a challenging collaborative buy-side consortium marketplace in terms of attracting buying and selling firms. When firms can register exclusively with at most one intermediary, the incumbent is only able to deter entry if the number of firms taking ownership in the consortium is sufficiently small. Otherwise, the consortium can successfully enter and monopolize the market. When firms can multi-home, i.e. they register simultaneously with both intermediaries, the consortium can always enter while both intermediaries stay in the market with positive profits.

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Bibliographic Info

Paper provided by Ifo Institute for Economic Research at the University of Munich in its series Ifo Working Paper Series with number Ifo Working Paper No. 5.

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Date of creation: 2005
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Handle: RePEc:ces:ifowps:_5

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Keywords: B2B e-commerce; intermediation; network externalities; matching.;

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References

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  1. Jackson, Matthew O. & Wolinsky, Asher, 1996. "A Strategic Model of Social and Economic Networks," Journal of Economic Theory, Elsevier, Elsevier, vol. 71(1), pages 44-74, October.
  2. Volker Nocke & Martin Peitz & Konrad Stahl, 2004. "Platform Ownership," PIER Working Paper Archive, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 04-029, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Luis Garicano & Steven N. Kaplan, 2001. "The Effects of Business-to-Business E-Commerce on Transaction Costs," NBER Chapters, National Bureau of Economic Research, Inc, in: E-commerce, pages 463-485 National Bureau of Economic Research, Inc.
  4. Hagiu Andrei, 2007. "Merchant or Two-Sided Platform?," Review of Network Economics, De Gruyter, De Gruyter, vol. 6(2), pages 1-19, June.
  5. Spulber,Daniel F., 2009. "The Theory of the Firm," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521517386.
  6. David Lucking-Reiley & Daniel F. Spulber, 2001. "Business-to-Business Electronic Commerce," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(1), pages 55-68, Winter.
  7. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(3), pages 135-152, Summer.
  8. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  9. Arial Rubinstein & Asher Wolinsky, 1985. "Equilibrium in a Market with Sequential Bargaining," Levine's Working Paper Archive 623, David K. Levine.
  10. Thomas Gehrig, 1993. "Intermediation in Search Markets," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1058, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Jackson, Matthew O., 1998. "The Evolution of Social and Economic Networks," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 1044, California Institute of Technology, Division of the Humanities and Social Sciences.
  12. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  13. Spulber, Daniel F, 1996. "Market Making by Price-Setting Firms," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(4), pages 559-80, October.
  14. repec:rje:randje:v:37:y:2006:3:p:720-737 is not listed on IDEAS
  15. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, Elsevier, vol. 45(4-6), pages 797-808, May.
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Cited by:
  1. Marco Henseler, 2006. "Horizontal versus Vertical Electronic Business-to-Business Marketplaces," Discussion paper series from the Institute of Economics and Law, University of Stuttgart, University of Stuttgart, Institute of Economics and Law 2006/1, University of Stuttgart, Institute of Economics and Law.

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