Does e-Commerce Always Increase Social Welfare in the Long Run?

Yuji Nakayama and Kiyohiko G. Nishimura
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Yuji Nakayama: College of Economics, Osaka Prefecture University
Kiyohiko G. Nishimura: Faculty of Economics, University of Tokyo

No CIRJE-F-144, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We examine the effect of electronic commerce ("e-commerce") on social welfare, in the framework of conventional spatial competition models. We consider the case where both conventional and electronic retailers coexist in equilibrium. We show that e-commerce does not necessarily increase social welfare in the long run. In particular, when electronic retailers have clear cost advantage over conventional retailers, then the advent of e-commerce is shown to reduce social welfare.

Pages: 33 pages
Date: 2002-01
New Economics Papers: this item is included in nep-mic
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