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Intermediation and CoordinationFiled Under: General

Received theory presents intermediation as the structure of a market. Microstructure of a market (O’Hara, 1997; Goodhart, 1989) refers to dynamics of transactions, relations, expectations and the time. Intermediaries served the most essential function of the microstructures of a market. Economic agents who interpolate them in between the producer of a good or services and its consumer are intermediaries according to the structural theorist. As a result of this structural emphasis the presence and the relevance
of an intermediary can be analyzed in terms of costs of transactions. A dispersed microstructure of intermediation can remain operative only so long as transactions costs (Coase, 1990) do not favor formation of vertically integrated (Williamson, 1985) or multidivisional firms (Chandler, 1990). This appears to be a static view of the market. This approach is static because it can indicate substitution of one structure by an alternate structure alone and it fails to indicate other functions of structures.

We would argue that the microstructure of intermediation serves a major function. This function is coordination, which elongates the period between production and consumption. Elongation of this period is absolutely necessary to the formation of capital because capital is nothing but deferment of consumption. Static coordination achieves this elongation in a limited sense while coordination of dynamic situations enhances this period substantially. The static structural account on the microstructure of intermediation
fails to capture this key aspect of coordination, which is a central theme in economic thinking because in its absence competition and innovation fail. Coordination between agents in a market is the key to the puzzle that the market survives through transformation, and that agents undergo changes in order to live through. Ecom refers to structural changes in market mediations and hence in the microstructure. Such changes lest reduced to anarchy or disruption must adhere to coordination, or more properly to coordination of expectations. Equilibrium or more particularly a dynamic equilibrium cannot be attained or maintained without the intervention of coordination. Coordination without mediation is impossible. We will take up two modes of coordination. Intermediaries are there in order to coordinate between two groups: first between several producers—current, potential and complementing, and second between producers and customers—current and potential. The former refers to aspects of competition relating to interoperability and inter-dependent innovations. The latter refers to aspects of creating and managing demand in the context of uncertainties. We discuss these two aspects in the present section very briefly on coordination with customers and in the following section on coordination amongst producers.

Taken From : Digital Economy – Impacts, Influences and Challenges