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Trading Network with Wireless Carriers as Intermediaries

A recent article on CNN Money discusses finding the best and cheapest carrier for your iPhone5. The article can be found at the following link: The article begins with urging consumers to realize that the costs of the iPhone5 do not simply include the initial device price, but also the 24-month long contract that the users are required to sign with one of several carriers. The article then goes on to give brief descriptions and comparisons of minutes and data plans that various wireless carriers offer. After reading this article I thought that it could be used as an example of trading networks.

In a trading network there are sellers and buyers connected in two steps with an intermediary known as a trader. The role of the trader is to connect buys and sellers that would otherwise be unable to interact with one and other. In this example the traders are the wireless carriers, the buyers are iPhone5 consumers, and the sellers are internet media outlets and retailers. The buyers wish to use their iPhones to access the information provided by the media outlets and the online stores. In this situation the product being traded can be thought of as either media information or the physical products available at online retailers.

The carrier intermediaries make the exchange between iPhone5 users and information outlets possible, although some differences between carriers do arise. Each carrier has a unique pricing system for data usage and talking minutes. Depending upon how much value a buyer places on data the carrier will try to ask for a price that will maximize its payoffs. For example if a specific region of users places higher value on data usage over minutes a wireless carrier might offer contracts that incorporate large amounts of data and a small amount of talking minutes.

Similar to physical trading networks, certain intermediaries in the iPhone5-Data trading network have positions of power. These positions of power arise due to location and coverage. A large provider that offers widespread coverage would have a position of power over iPhone5 users that wish to have access to data at any location. While wireless carriers that offer fast speeds such as 4G may hold a position of power in a trading network with buyers that require instantaneous access to information and data downloads. All carriers offer their own advantages and disadvantages but it is ultimately up to the buyer to determine his/her own value and match themselves with the appropriate carrier.



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