The future of electronic commerce infrastructure: Intermediated or Peer-to-Peer?

1 What will the future electronic commerce infrastructure look like? Will the intermediaries have a dominant role, or firms will link directly to their partners, or these two types of infrastructure will co-exist? This paper develops a formal gametheoretic model, adopting a two-sided networks framework, and characterizes the ecommerce infrastructure equilibrium under a variety of conditions. It shows that the asymmetry of the network effects between buyers and sellers, along with the costs of infrastructure, are crucial determinants of the infrastructure equilibrium. It predicts different scenarios for the evolution of an industry’s e-commerce infrastructure and the profitability of intermediaries. The paper characterizes new intermediary strategies that take into account the threat posed by the peer-to-peer alternatives. Finally, it analyzes the structure of competition between intermediaries. 1 I thank Professors Yannis Bakos and Nicholas Economides for useful comments and suggestions. Future of e-commerce infrastructure, November 2003 1 DOCTORAL DISSERTATION PAPER #2, EVANGELOS KATSAMAKAS