Shopping Versus Shipping: A Spatial Competition Theory of E-commerce

Toshitaka Gokan, Jacques-François Thisse and Xiwei Zhu

No 1007, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: We study competition between offline and online retailers, as well as competition between two polar cases of online firms. We propose a parsimonious model that incorporates shopping costs, shipping costs, distaste costs, and consumer taste heterogeneity in a duopoly. We first assume that e-retailers adopt uniform delivered pricing. As delivery technologies improve, e-retailers become able to implement personalized delivered pricing. Consumers are better-off under personalized delivered pricing. However, e-retailers compete in a Hero game in which they choose a combination of uniform delivered pricing and personalized delivered pricing.

Keywords: Online; retailing|personalized; prices|uniform; delivered; price (search for similar items in EconPapers)
JEL-codes: L13 L81 R10 (search for similar items in EconPapers)
Date: 2026-03
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Published in IDE Discussion Paper = IDE Discussion Paper, No.1007. 2026-03

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