Pricing and Service Quality in Electronic Commerce

Abstract

The study divides the Internet Economy into four layers. The first layer consists of the telecommunications companies, Internet Service Providers, Internet backbone carriers, local access companies and manufacturers of end-user networking equipment. In the second layer, Internet Applications Infrastructure involves software products and services necessary to facilitate Web transactions and transaction intermediaries. In addition to the software products that help facilitate Web transactions, this layer of the Internet Economy includes the consultants and service companies that design, build and maintain all types of Web sites, from portals to full e-commerce sites. The third layer, called the Internet Intermediary Indicator, consists of businesses that do not generate transaction-related revenues in the same way as the companies in other layers. There is a distinct type of company that operates in layer three, one that is predominantly an Internet pure-play. While not directly generating revenues from transactions, their Web-based business generates revenues through advertising, membership subscription fees and commissions. Many of the layer three companies are purely Web content providers, while others are market makers or market intermediaries. Finally, the companies that are included in layer four are only those companies that are conducting Web-based commerce transactions (Barua and Whinston, 2000).