Versioning, Brand-Stretching, and the Evolution of e-Commerce Markets

George Norman (), Lynne Pepall and Daniel Richards ()

No 114, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: This paper offers an analysis of the evolution of e-commerce markets. We develop a model in which an initial group of small, no-name click firms create such markets by offering horizontally differentiated customized or versioned products and competing in prices. Subsequently, a traditional brick firm enters by stretching its brand name into the digital marketplace. Such entry causes many initial entrants to exit. Contrary to much popular and formal literature, we show that the volume of initial entry may well be inefficiently low despite the anticipated later exit. In addition, the conventional relationship between sunk cost and market structure is substantially weakened.

Keywords: versioning; brand-stretching; price discrimination; market structure (search for similar items in EconPapers)
JEL-codes: L11 L86 (search for similar items in EconPapers)
Date: 2001
New Economics Papers: this item is included in nep-mic and nep-tid
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:tuf:tuftec:0114

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