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MODELLING THE TRADE MARKET FUNCTIONING WITH AVAILABLE ELECTRONIC AND TRADITIONAL TRADE MECHANISMS

O. Pursky (), B. Grinyuk () and I. Moroz ()
Additional contact information
O. Pursky: Professor of Economic Cybernetics Department of Kyiv National Trade and Economics University
B. Grinyuk: postgraduate student of Statistics Department of Kyiv National Trade and Economics University
I. Moroz: senior lecturer of Economic Cybernetics Department of Kyiv National Trade and Economics University

Economics of Development, 2016, vol. 77, issue 1, 85-91

Abstract: The functioning of a trade market has been studied based on modelling competitive interaction between e-shopping and traditional shopping. A linear city Salop classical model with symmetric differentiation of goods and free entry into the electronic trading market has been used. In the current study, the factor of the seller and buyer location in e-trading is determined by the cost of delivery. A mathematical model of competitive interaction between an online store and a conventional store which takes into account the shop location in the space of the trade market has been developed. It has been shown that depending on the store location on the trade market, the maximum price for consumers will be different, with the point of maximum price equilibrium values shifting as well. Customer transaction expenses in electronic trade essentially depend on the distance of delivery which is determined by the online store location on the trade market and depends on the category of territorial urbanization of the buyer and seller location. The obtained simulation results suggest a possibility of practical application of the developed model to predicting maximum prices of different goods in electronic trade markets. The effect of transition of a traditional shop to the mechanisms of electronic trade when a conventional shop creates an online showcase has been investigated. The investigation results of the effect of transition to the mechanisms of electronic trade have shown, that competition in electronic trade increases essentially if the online store and the online showcase of a conventional store are situated in one territorial urbanization category. As a consequence, this leads to lower prices and reduced profit in a regular store, as compared to the case of not opening an online showcase.

Keywords: electronic trading; modelling; Salop model; price competition. (search for similar items in EconPapers)
Date: 2016
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