Electronic B2B Marketplaces with Different Ownership Structures

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.business-to-business, ownership, network effect, intermediary, marketplace

Network effects in two-sided markets: why a 50/50 user split is not necessarily revenue optimal

“…Most two-sided markets are managed with the objective of maximizing profit generation via the paying installed user base (Yoo et al 2002(Yoo et al , 2007. Due to budgetary constraints, intermediaries are only able to acquire and serve a finite number of users.…”

“…Eisenmann et al (2006) provide a comprehensive list of examples for online and offline two-sided markets. Often, a neutral third party manages the platform (Yoo et al 2002(Yoo et al , 2007 with the commercial objective to maximize its own profits by optimally monetizing one or both user groups.…”

“…The intermediary provides a platform for the interaction between these groups (Berger and Gleisner 2009;Kraemer et al 2012;Yoo et al 2002Yoo et al , 2007. Usually, a user interacts only with participants from the other user group.…”

“…For example, more eBay sellers competing for a given number of potential buyers reduce each other's chances of transacting with a buyer. Depending on the investigated market, SNEs can possess either a negative effect (Dai and Kauffman 2006;Villanueva et al 2008;Yoo et al 2002Yoo et al , 2007 or a positive one (Bakos and Katsamakas 2008;Eisenmann et al 2006) on users' utility.…”

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

“…5 This can be related to multiform ownership structures of the B2B e-markets. Yoo et al (2007) defined three ownership structures: (1) buyer-owned (manufacturerowned) marketplaces where manufacturers jointly own the marketplace, (2) seller-owned (supplierowned) marketplaces, and (3) neutral marketplaces that are owned by independent third parties. The ownership structure could affect the choice of transparency level of a B2B e-market.…”