Electronic Commerce, Consumer Search and Retailing Cost Reduction

This paper explains four things in a unified way. First, how e-commerce can generate price equilibria where physical shops either compete with virtual shops for consumers with Internet access, or alternatively, sell only to consumers with no Internet access. Second, how these price equilibria might...

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Bibliographic Details
Published in:arXiv.org 2001-10
Main Authors: Pereira, Pedro, Mazón, Cristina
Format: Article
Language:English
Subjects:
Consumers
Economic models
Electronic commerce
Internet
Internet access
Retailing
Online Access:Get full text
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Summary:This paper explains four things in a unified way. First, how e-commerce can generate price equilibria where physical shops either compete with virtual shops for consumers with Internet access, or alternatively, sell only to consumers with no Internet access. Second, how these price equilibria might involve price dispersion on-line. Third, why prices may be higher on-line. Fourth, why established firms can, but need not, be more reluctant than newly created firm to adopt e-commerce. For this purpose we develop a model where e-commerce reduces consumers' search costs, involves trade-offs for consumers, and reduces retailing costs.
ISSN:2331-8422