Supplier Competition in Electronic Marketplaces.pdf

Supplier Competition in Electronic Marketplaces Shantanu Biswas (biswas@csa.iisc.ernet.in) and Y. Narhari (hari@csa.iisc.ernet.in) eEnterprises Lab, Computer Science and Automation, Indian Institute of Science. 2000/04/29 Abstract. The advent of e-business heralds new opportunities and challenges for buyers and sellers in business-to-business commerce. The electronic trading reduces transaction and search costs and reduces other market inefficiencies. The electronic trading also shortens sup- ply chains and lowers inventory carrying costs. On the other hand e-business increases supplier competition, reduces prices, and lowers the profit margins. Our study shows the potential benefits that accrue for the suppliers can offset the shrinkage of profit margins. Keywords: E-business, Supplier Competition, Switching Costs, Equilibrium Table of Contents 1 Introduction 2 2 Model Description 3 2.1 Assumptions 3 2.2 Non-cooperative Equilibrium 4 3 Numerical Results 6 3.1 Effects of E-Commerce 6 3.2 Study of Various Scenarios 6 3.3 Results 7 4 Conclusions and Future Work 10 5 Glossary 11
This research is supported in part by IBM Research Fellowship awarded to the author by IBM India Research Lab, New Delhi. ? 2002 Kluwer Academic Publishers. Printed in the Netherlands. ecrj.tex; 18/09/2002; 6:53; p.1 2 Shantanu Biswas, Y. Narahari 1. Introduction E-business offers buyers and sellers new marketing strategies and opportu- nities to create innovative marketplaces taking advantages of advances in communication technologies. An online seller needs only a small number of big warehouses from where the goods are packed and dispatched instead of a grid of physical selling outlets. Therefore e-commerce will reduce the distribution costs Au- tomated transactions will reduce transaction costs for buyers and sellers. Op- erational efficiencies can be realized because of fewer stages in transaction process and a reduction in staff required for transaction processing (Kaplan and Sawhney,