The Motivation and Implementation of Large Producers Constructing Private Electronic Market

We investigate how private electronic markets can be used as a strategic tool by a large producer to compete with a consortium of smaller producers. We model the competition between a large producer and consortium of producers in a two-tier supply chain as a game and characterize the resulting sub-game perfect Nash equilibrium. Our results demonstrate that as the private electronic market is established, there are greater returns to ownership of a private exchange. Finally, the technology issues about constructing private electronic markets from the point of business activities and system implement are discussed.