Abstract
Standard economic textbooks define markets as mechanisms for buyers and sellers to negotiate, price, and exchange goods or products and services. This mechanism is usually found in a marketplace (e.g., a stock exchange, an auction house, or the village bazaar). Electronic markets, on the other hand, operate in what Rayport and Sviokla (1994) define as marketspaces (i.e., information‐defined rather than physically defined arenas). Electronic markets can then be defined as digital infrastructures that facilitate transactions, in these spaces, in a market‐like fashion. Prominent examples of electronic markets range from those that use the auction mechanism to allocate goods and services between participants (e.g., eBay), to Internet‐based virtual stock markets used for predictions and innovation (e.g., Iowa Electronic Markets). They can be classified into two broader categories according to the capacity of the market maker/owner:
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