Adding unique value: how intermediary process development promotes market clearing in an online auction

Abstract

Recent online auction models have not specifically focused on how the intermediary or auctioneer firm adopts processes to facilitate the information flow between buyers and sellers to promote price setting, where supply equals demand, and the market is cleared. The increase in number and complexity of online auctions makes it important to understand the role of the online intermediary firm. This paper presents an online auction brokering model that combines the hub-and-spoke network structure with the pre-sale, sale, and post-sale stages of the transaction process to identify how the intermediary integrates trader firm information needs with behavioural and relationship characteristics and the internet functionalities of reach, richness and transparency to promote market clearing. This model, which has wider implications for other online and offline intermediated business models, is supported by evidence from a case study on Market Company, an intermediary firm situated in the New Zealand electricity market.