This example of network externalities is an example of ...
E312. Lecture 20
Thursday, 3 November 2005
Assignments
pp. 108-116 Thursday
Problem Set 10 due Tuesday
George Hoffer: Internet and the Automobile Industry
News article in NYTimes regarding about their business plan. ( and Community network effects)
Review
C. Vertical Integration:
1. The theory of the firm
2. The effect of the internet on transactions costs
3. Will the internet undermine the firm?
Preview
V. Auctions.
A. A Brief History
B. Who sells on the internet
C. What is sold
D. Why sell online?
E.
Lecture_______________________________________________________
IV. Chapter 4. Business Strategies and Conduct in the Electronic Marketplace
V. Auctions. (Discussion not in text) We turn now to the consideration of intent marketplaces. The canonical example is which provides a marketplace for sellers without an identity to sell goods and services to buyers, who in turn have no separate identity. But a variety of such marketplaces exist on the internet, ranging from sites that resell at discounted prices (;), resellers of new durables () travel firms (, ) job-service () to non-standard services, such dating services (), and B2B exchange (fast , LabX, Intermodal Exchange. ). Also, a large number of sites specialize in tradables. Many (but certainly not all) of these marketplaces sell non-standard products that are available only in limited supply. Finally, bricks and mortar stores often use the internet to complement their in-store presences.
A. A brief History
1994: Magic: the Gathering. (a newsgroup. A newsgroup devoted to trading of collectable goods.
First web-based auctions
OnSale (May 1995) – started selling refurburished computers and electronics. Used an auction format to attract (competitive) males.
Ebay (Sept 1995) An auction listing site. Collectables (Pez dispensers, Beanie Baibes, etc.
OnSale shifted to wholesaling
Yahoo and Amazon also have person to persion auction services.
Size distribution of auction sites. (1999 survey of 142 auction sites
83 < $10,000 per month
27 10K – 100K
21 100K – 1000K
7 >1,000K
B. Who sells on the internet? Products are sold via the internet in two ways
1. Online retailing (e.g., Neiman , or Circuit .
2. Auctions.
a. General auction sites. Here the canonical example is which provides a marketplace for sellers without an identity to sell goods and services to buyers, who in turn have no separate identity. Rivals include and .
b. Specialty sites. A variety of other marketplaces exist on the internet, ranging from sites that resell at discounted prices (;),
Specialty items ( (horses), Auction vine (wine) Antiques Canada(Antiques)
c. Resellers of new durables (, )
d. Services.
Travel agencies (, )
job-service () to non-standard services,
dating services (),
e. B2B exchange
fast parts.
Co LabX (used laboratory equipment,
Intermodal Exchange (shipping containers 4 way Logistics)
(chemical fertilizers, farm equipment).
National marine Exchange (boats and marine equipment)
(use proprietary software)
C. What do the Online retailers sell
C2C: Collectables. Specialty items (Sports cards, used goods, pets). But increasingly cars
B2C Used or refurburished items, overstocked items. Lots of computer equipment
B2B.
For C2C exchanges (as of 1999) items includes mostly flea market stuff (prices ................
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