Online Channel Competition in a Differentiated Goods Market

Sumi Cho () and Sang-Ho Lee
Additional contact information
Sumi Cho: Chonnam National University

Chapter 4 in The Economics of Online Markets and ICT Networks, 2006, pp 61-75 from Springer

Abstract: Conclusion This chapter considered a Hotelling model that incorporates competition effects arising from offline firm entry into online channels by examining equilibrium outcome when offline firms compete in online markets. Comparison is made of the welfare loss from online channel entry. First, a symmetric case of two offline firms demonstrates that, compared to the case of pure online competition, the entry into an offline channel may reduce welfare depending on the magnitude of consumer’s transport costs relative to firm’s offline delivery costs. The analysis is extended to an asymmetric case where two offline firms supply different quality goods. The result for this case provides useful input for policymakers dealing with online markets. Further research needs to consider dynamic issues such as the impact of network effects of online business and the lock-in effect of offline channels. Other challenging issues that require examination are the strategic incentives of hybrid firms, e.g., a storage cost saving effect from multiple channels and a complementary effect of online channels from advertising and online experience.

Keywords: Equilibrium Price; Price Competition; Profit Function; Delivery Cost; Free Entry (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-7908-1707-2_5

Ordering information: This item can be ordered from
http://www.springer.com/9783790817072

DOI: 10.1007/3-7908-1707-4_5

Access Statistics for this chapter

More chapters in Contributions to Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().