Emergence of Electronic Markets: Implication of Declining Transport Costs on Firm Profits and Consumer Surplus

Karl Morasch (karl.morasch@wiwi.uni-augsburg.de) and Peter Welzel (peter.welzel@wiwi.uni-augsburg.de)
Additional contact information
Karl Morasch: University of Augsburg, Department of Economics

No 196, Discussion Paper Series from Universitaet Augsburg, Institute for Economics

Abstract: Electronic coordination may drastically reduce transport costs, especially for digital or digitalizable products where local markets may actually shrink to a point in space. In the present paper we use a model with differentiated products to analyze the impact of declining transport costs on profits and consumer surplus. While consumers always gain, the effect on producers depends on the degree of product differentiation and the magnitude of transport costs in the electronic market mode. Profits do only rise if products are substantially differentiated – in this case the positive effect of an extended consumer base due to the preference for product differentiation dominates the negative effect of intensified competition. This result is amplified if transport costs in the electronic market mode are substantial. In this case profits only increase if products are almost independent.

JEL-codes: D43 F13 L13 L52 (search for similar items in EconPapers)
Date: 2000-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://opus.bibliothek.uni-augsburg.de/opus4/files/71265/196.pdf (application/pdf)

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:aug:augsbe:0196

Access Statistics for this paper

More papers in Discussion Paper Series from Universitaet Augsburg, Institute for Economics Universitaetsstrasse 16, D-86159 Augsburg, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Simone Raab-Kratzmeier (simone.raab@wiwi.uni-augsburg.de).