IESE Research Papers,
IESE Business School

Abstract: In this paper we analyze how transactions related to the exchange of goods and services are being performed on the Internet. The adoption of electronic markets in an industry has a disintermediation potential because it can create a direct link between the producer and the consumer (without the need for the intermediation role of distributors). Electronic markets lower the search cost, allowing customers to choose among more providers (which ultimately reduces both the costs for the customer and the profits for the producer). In this paper we contend that electronic markets on the Internet have the opposite effect, resulting in our increase in the number of intermediators. We introduce transaction streams, which model how transactions are being conducted and help explain the types of new intermediators that are appearing on the Internet. We also describe mechanisms by which companies are exploring ways of extending transaction streams. To illustrate the model and validate our findings, we analyze transaction streams in the insurance industry and review associated concepts such as trust and brands.

Keywords: transactions; electronic markets

24 pages, December 20, 1998

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