Shopping Versus Shipping: The Strategic Choice of Retail Format

Toshitaka Gokan, Thisse, Jacques-François and Xiwei Zhu

No 20913, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a parsimonious model that incorporates shopping and shipping costs, a distaste cost, consumer taste heterogeneity, and the pricing strategies of online and offline retailers. We compare offline, mixed and online duopolies and show that the retailing industry equilibrium depends on the degree of taste heterogeneity, but also on the value of shopping and shipping costs. Consumers' most-preferred retail format depends on their location relative to the retailers. In the aggregate, consumers are better-off under online retailing. However, firms are worse-off because they get trapped in a prisoner's dilemma.

JEL-codes: L13 L81 R10 (search for similar items in EconPapers)
Date: 2025-12
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