How do infomediaries affect firms' information strategies, and how do they impact buyer and social welfare?
AuthorMarkopoulos, Panos M.
Ungar, Lyle H.
PublisherAffiliation: Business and Public Administration, University of Cyprus, P.O. Box 20537, Nicosia, CY-1678, Cyprus
Affiliation: Carey Business School, Johns Hopkins University, 100 International Drive, Baltimore, MD 21202, United States
Affiliation: Computer and Information Science, University of Pennsylvania, 504 Levine, 200 S. 33rd St, Philadelphia, PA 19104-6309, United States
Correspondence Address: Business and Public Administration, University of Cyprus, P.O. Box 20537, Nicosia, CY-1678, Cyprus
SourceInternational Conference on Information Systems (ICIS 2013): Reshaping Society Through Information Systems Design
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Product information websites have become ubiquitous. This article explores their impact on firm profitability, consumer surplus, and social welfare. Using an analytical model, we show that firms take advantage of such infomediaries and cut down on their own information investments, increasing their profitability. Surprisingly, we find that the existence of these websites may be reducing social welfare, even if we ignore their cost of operation. In addition, and contrary to the common belief that product information websites are good for buyers, we show that they may be hurting consumers, even when their goal is to maximize consumer surplus. These findings lead us to recommend that product information websites should focus on roles that complement, rather than substitute, the information disclosure investments that firms freely choose on their own accord. © (2013) by the AIS/ICIS Administrative Office All rights reserved.
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