The growth of E-commerce had suddenly changed the ground-rules for conducting business, linking the consumer directly to the producer. The digitization of content also meant faster and easier transmission of information from one point to another in a network, thus reducing the need for an intermediary. It was assumed that intermediaries would disappear resulting in frictionless commerce. This paper reexamines such claims of disintermediation and whether intermediaries generate friction in transactions. Theoretically, it argues the contrary, suggesting that intermediation is a necessary evil in e-commerce transactions. In order to justify such claims, the paper assumes that e-commerce exhibits network externality and reviews intermediation in the light Transaction Cost Economics and Agency Theory.
Datta, Pratim, "Intermediaries as Value Moderators in Electronic Marketplaces" (2005). ECIS 2005 Proceedings. 35.