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As electronic marketplaces proliferated in recent years, many observers predicted the disappearance of middlemen. With consumers reaching producers directly, there would be little need for old-fashioned intermediaries, and the Internet-oiled wheels of commerce would roll along more efficiently than ever. We developed an electronic marketplace simulation - specifically, a marketplace of information. Automated agents, which we designed to act as information suppliers, information consumers, or information middlemen (whom we dubbed InfoCenters), played all the roles in these simulations. We ran the simulations to test how InfoCenter intermediaries affected the market's efficiency and price behavior. We show how the existence of intermediaries affects the efficiency of electronic markets. We looked at several different middle-agent strategies, comparing how they-and the market-performed in each case. The bottom line: InfoCenters significantly enhanced the efficiency of our information marketplaces. And more sophisticated InfoCenters did the best of all.
Date of Publication: Nov-Dec 2003