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Electronic B2B Marketplaces with Different Ownership Structures

Author

Listed:
  • Byungjoon Yoo

    (Korea University Business School, 1, 5-ga, Anam-Dong, Sungbuk-Gu, Seoul 136-701, Korea)

  • Vidyanand Choudhary

    (Merage School of Business, University of California, Irvine, Irvine, California 92697)

  • Tridas Mukhopadhyay

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

Abstract

This paper analyzes electronic marketplaces with different ownership structures: biased marketplaces and neutral marketplaces. Biased marketplaces can be either buyer-owned or supplier-owned, whereas neutral marketplaces are owned by independent third parties. We develop a single-period model, with fulfilled expectations equilibrium. The buyers experience positive network effects that are a function of the number of suppliers and the suppliers receive similar positive network effects depending on the number of buyers. We develop a general model with atomistic buyers and suppliers. We find that biased marketplaces set prices to induce greater participation (demand) from both buyers and suppliers compared to a neutral marketplace. This counterintuitive result can be understood in the context of the positive cross-network effects experienced by buyers and suppliers and the added benefit to the owner of a biased marketplace from participating in the marketplace. Biased marketplaces also provide greater social welfare compared to neutral marketplaces.

Suggested Citation

  • Byungjoon Yoo & Vidyanand Choudhary & Tridas Mukhopadhyay, 2007. "Electronic B2B Marketplaces with Different Ownership Structures," Management Science, INFORMS, vol. 53(6), pages 952-961, June.
    • Handle: RePEc:inm:ormnsc:v:53:y:2007:i:6:p:952-961
    DOI: 10.1287/mnsc.1060.0685
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    References listed on IDEAS

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    Cited by:

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    3. Jullien, Bruno, 2010. "Two-Sided B2B Platforms," IDEI Working Papers 652, Institut d'Économie Industrielle (IDEI), Toulouse, revised Mar 2011.
    4. Soloviev, I. & Shaidullin, A., 2024. "The prospect of the theory of network effects for analyzing inter-o rganizational networks," Journal of the New Economic Association, New Economic Association, vol. 63(2), pages 12-33.
    5. 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.
    6. Li, Yung-Ming & Jhang-Li, Jhih-Hua, 2011. "Analyzing online B2B exchange markets: Asymmetric cost and incomplete information," European Journal of Operational Research, Elsevier, vol. 214(3), pages 722-731, November.
    7. Genc, Talat S. & Reynolds, Stanley S., 2019. "Who should own a renewable technology? Ownership theory and an application," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 213-238.
    8. Katsuhiko Shimizu, 2008. "New Strategy Implementation and Learning: Importance of Consensus," Working Papers 0034, College of Business, University of Texas at San Antonio.
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