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Intermediation and Coordination (3)Filed Under: General

Moreover previous markets with near-zero innovations in products could afford to make calculations on prices and quantities, such as the average cost, marginal cost and marginal return. In sequential competition no product can complete its life cycle and hence calculations of quantities and prices remain no longer exogenous. Price-quantity variables now come under the scanner of negotiated endogenous settlements. Uncertainties about the potential product and information asymmetries between the current
product market and that of the market of the product next in sequence necessarily implicates microstructures in the market who can bear the risk, who can provide insurance, or hold the stock-in-progress, and who above all can calculate on durability of the current product. This switch to sequential competition therefore relegates monopolistic price-quantity variables to non-importance and substitutes those by new endogenous and negotiated variables, which are sequentially differentiated prices.
Microstructure of mediation becomes the absolute necessity. Ecom therefore in lieu of dis-intermediation demands vigorous intermediation through novel market microstructures.

Finally, a future product and its arrival as well as its power to fulfill the expectations of the customer must defer the consumption of that potential product. Consumption of the current product is given up in expectation of the arrival of the future product. Deferment thus takes place twice at the levels of both consumption and production. Ecom and its intermediary-based coordination therefore shift the consumption through elongating the chains of price-based intermediation. This often happens through several kinds of limit orders or limit pricing, or through other modes of negotiated and insured shifts.
Dispersion of prices can happen only when intermediation advances to raise buffers for absorbing the shocks. Price dispersion in Ecom can be afforded because enough mediated buffers have been put in place. This brief account above on customer-producer coordination shows us how intermediation and deferment increases in Ecom. To recall, this deferment is of the first kind arising from customer-producer coordination of expectations. We now look at the deferment of the second kind.

Taken From : Digital Economy – Impacts, Influences and Challenges