University of Auckland

Oligopolistic Business-to-Business E-Market and Welfare

Email address: r.aoki@auckland.ac.nz

Keywords: business-to-business electronic commerce, oligopoly, vertical restraints, e-markets

JEL Classifications: L13, D43, L22

Abstract:
We examine the effect of an oligopolistic upstream electronic market on upstream and downstream prices. The analysis highlights the two sources of competition that a firm that source from an electronic market (e-market firm) face: competition with less efficient firms that source traditionally (t-market firms) and competition among e-market firms. When size of the upstream e-market is small, the first effect dominates and there is higher profits with lower upstream prices in the e-market. When size of the e- market becomes very large, the second effect makes e-market firms less profitable than t-market firms even though e-market price may start to increase (as market size increases). As consequence, e-market will never completely eliminate the upstream t-market and downstream price can increase when e-market grows beyond a certain size.

PDF file of paper: aoki.pdf

Session: Network Economics

Time: Sunday, 8 July, 8am - 9:30am

Room: A