concerned with minimizing distribution costs. And since no online retailer is closer to consumers than their suppliers, we need not consider the distributive efficiency. Nevertheless, an online intermediary minimizes distribution costs in its own way by reducing costs associated with network traffic. If we compare intermediated and disintermediated markets(see Figure 5.3), the similarity is striking The stylized diagram, Figure 5.3, shows how consumers access product information In(a) each buyer sends a query to all sellers to get product information, whereas in(b), buyers can get information from the intermediary who receives information packages from all these sellers. In a similar delivery scheme in physical markets, such an intermediated structure may not be efficient if some sellers are located closer to buyers than is the intermediary. A significant inefficiency can occur in the hub-and-spoke system used by airlines if some passengers(buyers)are forced to go through the hub (intermediary) regardless of the extra distance involved. In the virtual environment of the electronic marketplace, however, an intermediated search market dramatically reduces duplicated traffic and enhances network efficienc This network efficiency has little to do with the intermediary's role in assisting consumers' selection process, the efficiency resulting simply from providing a centralized outlet for all sellers But, this centralization needs not require the same contents to be stored in both producers and the intermediary's Web sites-a wasteful duplication. Instead, the product information at the intermediary's Web site will have only the necessary information for buyers to make purchase decisions. In a way, the intermediary also acts as an information filtering agent, which is the second type of efficiency in intermediation Besides intermediaries, consumers have many tools to filter information, and for this reason, we discuss information filtering in the next section elle B Sellers Buvers <○ ntermediary Figure5-3 Information access with and without an intermediary (a)Disintermediation (b) Intermediation In an extreme case, proper selection and evaluation of a product may require full information contained in the seller's Web site instead of a summary provided by an intermediary. In that case face-to-face information exchanges can actually be more efficient than intermediation because of the latter's unnecessary duplication. But this will be more of an exception than the rule in electronic commerce because the quality of a digital product is difficult to evaluate even with full information or the product itself. More importantly, intermediaries also resolve the quality uncertainty problem. If buyers were to contact sellers directly, the accessed information might not be reliable unless the content providers were trust worthy. As we examined, by using a simpl contract, intermediaries often become trusted third parties in electronic commerce even without verifying all products they broker 5.3 Search Services on the Internet In this and the next two sections, we examine various search services on the Internet in terms of the search market and information efficiencies we just discussed. In addition, we compare the network efficiency of information search channels and discuss some implications of this on market organization and advertisingconcerned with minimizing distribution costs. And since no online retailer is closer to consumers than their suppliers, we need not consider the distributive efficiency. Nevertheless, an online intermediary minimizes distribution costs in its own way by reducing costs associated with network traffic. If we compare intermediated and disintermediated markets (see Figure 5.3), the similarity is striking. The stylized diagram, Figure 5.3, shows how consumers access product information. In (a), each buyer sends a query to all sellers to get product information, whereas in (b), buyers can get information from the intermediary who receives information packages from all these sellers. In a similar delivery scheme in physical markets, such an intermediated structure may not be efficient if some sellers are located closer to buyers than is the intermediary. A significant inefficiency can occur in the hub-and-spoke system used by airlines if some passengers (buyers) are forced to go through the hub (intermediary) regardless of the extra distance involved. In the virtual environment of the electronic marketplace, however, an intermediated search market dramatically reduces duplicated traffic and enhances network efficiency. This network efficiency has little to do with the intermediary's role in assisting consumers' selection process, the efficiency resulting simply from providing a centralized outlet for all sellers. But, this centralization needs not require the same contents to be stored in both producers' and the intermediary's Web sites—a wasteful duplication. Instead, the product information at the intermediary's Web site will have only the necessary information for buyers to make purchase decisions. In a way, the intermediary also acts as an information filtering agent, which is the second type of efficiency in intermediation. Besides intermediaries, consumers have many tools to filter information, and for this reason, we discuss information filtering in the next section. Figure5-3 Information access with and without an intermediary (a) Disintermediation (b) Intermediation In an extreme case, proper selection and evaluation of a product may require full information contained in the seller's Web site instead of a summary provided by an intermediary. In that case, face-to-face information exchanges can actually be more efficient than intermediation because of the latter's unnecessary duplication. But this will be more of an exception than the rule in electronic commerce because the quality of a digital product is difficult to evaluate even with full information or the product itself. More importantly, intermediaries also resolve the quality uncertainty problem. If buyers were to contact sellers directly, the accessed information might not be reliable unless the content providers were trust worthy. As we examined, by using a simple contract, intermediaries often become trusted third parties in electronic commerce even without verifying all products they broker. 5.3 Search Services on the Internet In this and the next two sections, we examine various search services on the Internet in terms of the search market and information efficiencies we just discussed. In addition, we compare the network efficiency of information search channels and discuss some implications of this on market organization and advertising