Business-to-Business Electronic Commerce

This paper provides an overview of the economic issues arising in business-to-business (B2B) online commerce. Just as the industrial revolution mechanized the manufacturing functions of firms, the information revolution is automating their merchant functions. We examine four types of potential productivity gains expected from business-to-business (B2B) electronic commerce: cost efficiencies from automation of transactions, potential advantages of new market intermediaries, consolidation of demand and supply through organized exchanges, and changes in the extent of vertical integration of firms. We also describe the characteristics of early B2B online intermediaries, including categories of goods traded, market mechanisms employed, and ownership arrangements, and considers the market structure of B2B e-commerce.

First version: June 2000

Last revised: November 1, 2000

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