The impact of the internet on horizontal and vertical competition: Market efficiency and value chain reconfiguration

In this chapter, we review research on the Internet's impact on ‘horizontal’ and ‘vertical’ competition. First, focusing on horizontal competition, we examine theory and empirical evidence on the extent to which the Internet increases market efficiency, as well as possible underlying explanations for the observed empirical patterns. Second, turning to vertical competition among market players within the value chain, we analyze the extent to which the Internet leads to ‘disintermediation'’ ‘reintermediation’, or other forms of value chain reconfiguration. We find little support for early predictions that the Internet will have a dramatic impact on horizontal and vertical competition.