Electronic coordination in oligopolistic markets: Impact on transport costs and product differentiation
Martin Bandulet () and
Karl Morasch
No 2002,4, Working Papers in Economics from Bundeswehr University Munich, Economic Research Group
Abstract:
Electronic coordination links markets at different locations that have initially been (partially) separated by transport costs. Rising competitive pressure should in turn affect incentives to differentiate products. In this paper investment decisions concerning transport cost reduction and product differentiation are analyzed in a heterogenous product duopoly where firms compete in two spatially separated markets. We show that firms always have nonnegative incentives to invest in transport cost reduction, while there exist parameter ranges where product differentiation will actually be reduced after an exogenous reduction of transport cost. We also compare social and privat investment incentives for both price strategies (most likely with digital products) and quantity competition (capacity decisions for physical products). Based on these results we discuss in detail how investment decisions are likely to differ from the efficient solution for each of the two kind of products.
Keywords: Electronic markets; Strategic investments; Transport costs; Product differentiation; Elektronische Märkte; Strategische Investition; Transportkosten; Produktdifferentierung (search for similar items in EconPapers)
JEL-codes: D43 D61 L13 (search for similar items in EconPapers)
Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://www.econstor.eu/bitstream/10419/32817/1/36117716X.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:zbw:ubwwpe:20024
Access Statistics for this paper
More papers in Working Papers in Economics from Bundeswehr University Munich, Economic Research Group Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().