Abstract
The ‘disintermediation’ hypothesis remains a provocative proposition emerging from early literature on electronic commerce. Considerable anecdotal evidence supports the ‘disintermediation’ hypothesis, but limited empirical data on electronic commerce makes it difficult to test. Transaction cost analysis, search cost analysis and product characteristic analysis have been used as conceptual frameworks, with the main focus of these analyses being changes in market efficiency, prices and distribution of surplus among consumers and producers. Our analysis indicates that electronic commerce provides a nearly costless and fast alternative to coordination, communication and exchange functions. Until suitable institutions emerge to replace functions provided by middlemen, complete ‘disintermediation’ is not expected. We narrate five case studies to counter the ‘disintermediation’ hypothesis.
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