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 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.Comment: 29th TPRC Conference, 200

ELECTRONIC COMMERCE, CONSUMER SEARCH AND RETAILING COST REDUCTION

This paper explains three 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. For this purpose we develop a model where e-commerce: reduces consumers’ search costs, involves trade-offs for consumers, and reduces retailing costs.

Electronic commerce, consumer search and reailing 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 hops 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 firms to adopt ecommerce. For this purpose we develop a model where e-commerce reduces consumers’ search costs, involves trade-offs for consumers, and reduces retailing costs. Este trabajo explica, de manera unificada, cuatro cosas. Primero, cómo el comercio electrónico puede generar equilibrios de precios en los que las tiendas físicas compiten con las tiendas virtuales por los consumidores con acceso a Internet, o, alternativamente, venden sólo a los clientes que no tienen acceso a Internet. Segundo, cómo estos equilibrios de precios pueden generar dispersión de precios en Internet. Tercero, por qué los precios de las tiendas virtuales pueden ser más altos que los de las tiendas físicas. Y cuarto, por qué las empresas establecidas pueden tener menos incentivos que las empresas de nuevas creación para abrir tiendas virtuales. Para ello desarrollamos un modelo en el que el comercio electrónic o reduce los costes de búsqueda de los consumidores, implica un trade-off para los consumidores, y disminuye los costes de producción de las empresas.Electronic-Commerce, Search, Cost Reduction, Retailing

Internet Retailing as a Marketing Strategy

We analyze the incentives for incumbent bricks-and-mortar firms and new entrants to start an online retail channel in a differentiated goods market. To this end we set up a two-stage model where firms first decide whether or not to build the infrastructure necessary to start an online retail channel and then compete in prices using the channels they have opened up. Consumers trade-off the convenience of online shopping and the ease to compare prices, with online uncertainties. Without a threat of entry by a third pure online player we find that for most parameter constellations firms' dominant strategy is not to open an online retail channel as this cannibalizes too much on their conventional sales. As the cannibalization effect is not present for a pure Internet player, we show that these firms will start online retail channels under a much wider range of parameter constellations. The threat of entry may force incumbent bricks-and-mortar firms to deter entry by starting up an Internet retail channel themselves. We also show that a low cost of building up an online retail channel or online shopping conveniences may not be to the benefit of online shopping as the strategic interaction between firms may be such that no online retail channel is built when the circumstances seem to be more favourable

Essays on Internet and Information Economics

In the last decade we have witnessed advances in information and communication technologies. These ICTs play a central role in the world economy: the rise of the Internet has facilitated the dissemination of information, while technological progress at the same time enhances the acquisition of information, for example in health care. Nevertheless, information processing is still bound by human nature, and the ease by which one economic agent can nowadays contact another may overload the latter. Other limitations include the fact that not everything of value can be digitalized, that exchange via Internet is indirect and disclosure of personal information may enable discrimination. The impact of these technologies on society is therefore equivocal. This book consists of five essays that each discuss some of the above issues and their impact on markets, with applications to e- commerce, insurance and the competition for attention