E-commerce, two-sided markets and info-mediation
AbstractParticipants in a market, buyers and sellers, may need the service of an intermediary who will put them into contact and give them information about their potential trading partner. The intermediary chooses what price it will charge to each side to have access to its service. It also chooses what information it will reveal, for example to the buyer about the value of the seller’s product. In a market with network externalities, it would be optimal that everybody had access to the other side, as each side wants as many agents from the other side to be present as possible. This is however not feasible as the intermediary must charge positive access prices if it is to make any profit. In a market with asymmetric information, it would be optimal that all information about the buyers’ and sellers’ valuation for the traded product be available, but the intermediary will want to conceal or manipulate that information to increase its profit. The paper examines in the first part how network externalities play out in the intermediary’s access pricing strategies in both a monopoly and a competitive setting. In the second part, the paper shows how the intermediary will strategically manipulate and conceal information to extract the surplus from trade in the market it intermediates.
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Bibliographic InfoPaper provided by EconWPA in its series Industrial Organization with number 0503014.
Length: 30 pages
Date of creation: 31 Mar 2005
Date of revision: 05 Apr 2005
Note: Type of Document - pdf; pages: 30
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Intermediation; internet; asymmetric information; information goods; network effects; two sided markets; matching.;
Other versions of this item:
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-IND-2005-04-16 (Industrial Organization)
- NEP-INO-2005-04-16 (Innovation)
- NEP-MIC-2005-04-16 (Microeconomics)
- NEP-NET-2005-04-16 (Network Economics)
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