The role of dealers in electronic markets: Empirical insights from online auctions

Wenjing Duan, Bin Gu, Andrew B. Whinston

Research output: Chapter in Book/Report/Conference proceedingConference contribution


This study examines the impact of intermediaries (dealers) in online Consumer-to-Consumer (C2C) market. Online C2C transactions, such as the Internet auctions on eBay, are one of the most successful forms of electronic commerce (e-commerce). It has been suggested by many scholars that the Internet or electronic markets will eliminate intermediaries by lowering search cost and allowing direct and efficient interactions between sellers and buyers. However, a close examination of the market mechanism indicates that many functions provided by intermediaries are indispensable. Specifically, we consider intermediaries' role in price discovery and trust building in electronic markets. Intermediaries provide a buffer for temporary misalignment between supply and demand by buying low and selling high, which provides product liquidity to buyers and sellers in online markets. Intermediaries also help build trust by engaging in transactions with risk-averse buyers and sellers who otherwise will not participate in the market. Using a dataset from eBay's online auctions, we examine empirically these two functions in online C2C auction markets. We find that the presence of dealers has a significant impact on market liquidity, resulting in more successful trades and higher auction prices. In addition, we find that dealers are more likely to engage in transactions with less established sellers. Their presence reduces the reputation penalty faced by these players and further facilitates the success of auctions.

Original languageEnglish (US)
Title of host publicationICIS 2006 Proceedings - Twenty Seventh International Conference on Information Systems
Number of pages10
StatePublished - 2006
Externally publishedYes
Event27th International Conference on Information Systems, ICIS 2006 - Milwaukee, WI, United States
Duration: Dec 10 2006Dec 13 2006


Other27th International Conference on Information Systems, ICIS 2006
Country/TerritoryUnited States
CityMilwaukee, WI


  • Dealer
  • E-commerce
  • Electronic market
  • Intermediary
  • Internet auction
  • Liquidity
  • Online C2C market

ASJC Scopus subject areas

  • Information Systems


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