Time Constraints for Sellers in Electronic Markets

Marketplace Business Model

EMs are virtual places where entities present, negotiate and agree upon the purchase of specific products. When the negotiated products are pieces of information such markets are termed Information Markets (IMs). Information has a number of specific characteristics which differentiates it from the classical products such electronics, books, etc. First of all, the economics of information production indicate that the information production costs more when the first copy is produced and less for the additional pieces. Furthermore, information can be characterized as out-of-date more easily than classical products. For example, a stock price has greater value for limited time duration. Hence, sellers want to sell such products as soon as possible. Finally, information is always available to buyers. A seller negotiating DVD players has limited capabilities of delivery which can have negative result when they run out of products.

In general, EMs involve two main groups of entities: the buyers and the sellers. Buyers try to buy products at the lowest possible price while sellers try to sell products at the highest possible price. It is obvious, that there is a conflict of interests between these two groups. Hence, we can focus on their direct interaction and model this interaction as a Bargaining Game (BG) with incomplete information (Fudenberg & Tirole, 1991). Game theory (Rubinstein & Osborne, 1994) has been extensively studied by the research community. BGs have been thoroughly reviewed in Rubinstein’s study (1985a; 1985b). Rubinstein has studied a BG with alternating offers and has defined the equilibrium for such games. Fudenberg and Tirole (1983) studied a simple two person two-period BG and presented a solution using the perfect Bayesian equilibrium approach. However, there is a difficulty when studying BGs under incomplete knowledge.