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The Effects of Information Transparency on Suppliers, Manufacturers, and Consumers in Online Markets

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  • Zach Zhizhong Zhou

    (Rady School of Management, University of California, San Diego, San Diego, California 92093)

  • Kevin Xiaoguo Zhu

    (Rady School of Management, University of California, San Diego, San Diego, California 92093)

Abstract

This paper looks into the effects of information transparency on market participants in an online trading environment. We study these effects in business-to-business electronic markets with firms competing in both upstream and downstream industries. The prior literature generally assumes that either the downstream firm (buyer) or the upstream firm (seller) is a monopoly. It is not clear whether information transparency would still create value if both buyers and sellers face oligopolistic competition, where the benefits of information transparency could be competed away. To answer this question, we first develop a simple two-echelon e-market model and then extend the model to more general settings. We find that information transparency can create value for the overall e-market, yet it affects buyers and sellers very differently: one side will be hurt, depending on the competition mode (Cournot or Bertrand) in the downstream. This suggests that a manufacturer-owned, a supplier-owned, and a neutral e-market will have different preferences for information transparency. Finally, we find that information transparency can hurt consumers when the downstream industry engages in Bertrand competition. This is a surprising result given the expectation that online markets create substantial value for consumers.

Suggested Citation

  • Zach Zhizhong Zhou & Kevin Xiaoguo Zhu, 2010. "The Effects of Information Transparency on Suppliers, Manufacturers, and Consumers in Online Markets," Marketing Science, INFORMS, vol. 29(6), pages 1125-1137, 11-12.
    • Handle: RePEc:inm:ormksc:v:29:y:2010:i:6:p:1125-1137
    DOI: 10.1287/mksc.1100.0585
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    References listed on IDEAS

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    5. Wu, Junjian & Wang, Haiyan & Shang, Jennifer, 2019. "Multi-sourcing and information sharing under competition and supply uncertainty," European Journal of Operational Research, Elsevier, vol. 278(2), pages 658-671.
    6. Karakoç, Gülen & Pagnozzi, Marco & Piccolo, Salvatore, 2022. "The value of transparency in dynamic contracting with entry," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    7. Watson, George F. & Worm, Stefan & Palmatier, Robert W. & Ganesan, Shankar, 2015. "The Evolution of Marketing Channels: Trends and Research Directions," Journal of Retailing, Elsevier, vol. 91(4), pages 546-568.
    8. Xu Guan & Ying‐Ju Chen, 2016. "Timing of information acquisition in a competitive environment," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(1), pages 3-22, February.
    9. Zhu, Haoruo & Ni, Yaodong & Yang, Meng & Song, Qinyu, 2023. "Blessing or curse? Impact of incomplete information in a networked cournot competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 179(C).
    10. Zhang, Xubing & Jiang, Bo, 2014. "Increasing Price Transparency: Implications of Consumer Price Posting for Consumers' Haggling Behavior and a Seller's Pricing Strategies," Journal of Interactive Marketing, Elsevier, vol. 28(1), pages 68-85.
    11. Tao Wang & Shi-Xiao Wang, 2022. "International Manufacturer’s Online Marketplace Choice Considering Behavior-Based Pricing," Sustainability, MDPI, vol. 14(21), pages 1-18, November.
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    13. Radoslav Delina & Renata Olejarova & Petr Doucek, 2023. "Effect of a new potential supplier on business to business negotiations performance: evidence-based analysis," Electronic Commerce Research, Springer, vol. 23(3), pages 1941-1970, September.
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    15. Yanling Yang & Yanling Zheng & Guojie Xie & Yu Tian, 2022. "The Influence Mechanism of Strategic Partnership on Enterprise Performance: Exploring the Chain Mediating Role of Information Sharing and Supply Chain Flexibility," Sustainability, MDPI, vol. 14(8), pages 1-23, April.
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