Business‐to‐business electronic marketplaces: Joining a public or creating a private

We analyse a firm's incentives to create a private B2B e‐marketplace or to join a public e‐marketplace. In the former the firm incurs higher set‐up costs but lower quality investment costs due to closer supplier–buyer collaboration than in the public . In the latter, the firm's quality improvement may spillover to competitors. We show that a firm's incentives to create a private e‐marketplace are stronger, the closer is supplier–buyer collaboration, the higher are spillovers, and the larger is the buyer's profit share within the e‐marketplace. Our welfare analysis indicates that a firm's incentives do not always coincide with those of a social planner. Copyright © 2004 John Wiley & Sons, Ltd.