The Role of Quantitative and Qualitative Network Effects in B2B Platform Competition

33 Pages Posted: 10 Dec 2012 Last revised: 22 Aug 2014

See all articles by Zhiwen Li

Zhiwen Li

Jiangsu University, School of Management

Thierry Pénard

Université de Rennes 1 - Faculte de Sciences Economiques; Armorican Mole for Research on the Information Society and Uses of the Internet; Centre de Recherche en Économie et Management (CREM)

Date Written: November 10, 2012

Abstract

This article aims at investigating how quantitative and qualitative (indirect) network effects impact pricing and trading decisions on a Business-to-Business marketplace. Using an original data set collected on MFG.com, one of the most prominent B2B platforms in the U.S.A., we find that the market share of a marketplace depends on both the quantity and quality of suppliers, but that quality effects tend to substitute for quantity effects as the size of the marketplace increases. These results suggest that while the quantity of suppliers on board is crucial during the early stage of a marketplace, supplier quality matters much more in the mature stage.

Keywords: network effects, business-to-business, electronic marketplace, two-sided market

JEL Classification: L14, L15, L81

Suggested Citation

Li, Zhiwen and Pénard, Thierry, The Role of Quantitative and Qualitative Network Effects in B2B Platform Competition (November 10, 2012). Available at SSRN: https://ssrn.com/abstract=2187519 or http://dx.doi.org/10.2139/ssrn.2187519

Zhiwen Li

Jiangsu University, School of Management ( email )

301 Xuefu Road
Zhenjiang, Jiangsu 212013
China

Thierry Pénard (Contact Author)

Université de Rennes 1 - Faculte de Sciences Economiques ( email )

7, Place Hoche
35000 Rennes
France

Armorican Mole for Research on the Information Society and Uses of the Internet ( email )

France

Centre de Recherche en Économie et Management (CREM) ( email )

7 place Hoche
Rennes, Bretagne 35065
France

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