Industry structure, network externalities, and strategy in the choice and ownership of Internet marketplaces for agriculture

This thesis explores the determinants of the choice and ownership of Internet marketplaces for agriculture. In the early stages of the Internet, policymakers and regulators expressed concern that large buyer and seller ownership of Internet marketplace of a particular commodity would allow the owners to enhance their market power. This thesis suggests that ownership by large buyers and sellers may often be the most efficient result; however, instances are found when government intervention to encourage third-party ownership of Internet marketplaces is optimal. In order to arrive at these conclusions, a characterization of Internet marketplaces and a synthesis of theoretical issues are performed to highlight the basic issues in marketing of agricultural commodities on the Internet. A theory is presented which shows how industry structure and player beliefs about marketplace use drive choice and ownership of marketplaces. The predictions suggest that surviving Internet marketplaces will be those with strong historical linkages in an industry and those owned by major commodity buyers or sellers. It is also found that industry structure and prior beliefs about marketplace use can, at times, be pivotal in determining the choice and ownership of an Internet marketplace. Comparisons of these predictions with actual outcomes provide validation of the theory. In addition, where predictions differ from actual results, observations are made as to the idiosyncratic nature of the commodity markets that give rise to such deviations.; This thesis permits a deeper understanding of other real-world connections that affect the choice and ownership of Internet marketplaces and related mechanisms for the buying and selling of agricultural commodities. While the predictions and comparisons in this thesis do not allow for the rejection of the idea that the Internet can help large players leverage their market power, it provides an alternative logic for large buyers and sellers in an industry setting up such marketplaces.