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E-commerce, two-sided markets and info-mediation

  • Alexandre Gaudeul

    (University of East Anglia - Norwich and ESRC-CCP)

  • Bruno Jullien

    (IDEI - GREMAQ - University of Toulouse)

Participants 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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File URL: http://128.118.178.162/eps/io/papers/0503/0503014.pdf
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Paper provided by EconWPA in its series Industrial Organization with number 0503014.

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Length: 30 pages
Date of creation: 31 Mar 2005
Date of revision: 05 Apr 2005
Handle: RePEc:wpa:wuwpio:0503014
Note: Type of Document - pdf; pages: 30
Contact details of provider: Web page: http://128.118.178.162

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  1. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
  2. Caillaud, Bernard & Jullien, Bruno, 2001. "Competing cybermediaries," European Economic Review, Elsevier, vol. 45(4-6), pages 797-808, May.
  3. Paul R. Milgrom, 1979. "Good Nevs and Bad News: Representation Theorems and Applications," Discussion Papers 407R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Asher Wolinsky, 1991. "Competition in a Market for Informed Experts' Services," Discussion Papers 959, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Roland Strausz, . "Honest Certification and the Threat of Capture," Papers 018, Departmental Working Papers.
  6. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA.
  7. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  8. Guerra, G.A., 2001. "Certification Disclosure And Informational Efficiency: A Case For Ordered Ranking Of Levels," Economics Series Working Papers 9964, University of Oxford, Department of Economics.
  9. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
  10. Albano, Gian Luigi & Lizzeri, Alessandro, 2001. "Strategic Certification and Provision of Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 267-83, February.
  11. David P. Baron & David Besanko, 1984. "Regulation, Asymmetric Information, and Auditing," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 447-470, Winter.
  12. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
  13. Josh Lerner & Jean Tirole, 2004. "A Model of Forum Shopping, with Special Reference to Standard Setting Organizations," NBER Working Papers 10664, National Bureau of Economic Research, Inc.
  14. Khalil, Fahad & Lawarree, Jacques, 1995. "Collusive Auditors," American Economic Review, American Economic Association, vol. 85(2), pages 442-46, May.
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