Advanced Search
MyIDEAS: Login to save this paper or follow this series

Internet Retailing as a Marketing Strategy


Author Info

  • Maarten C.W. Janssen

    (Faculty of Economics, Erasmus Universiteit Rotterdam)

  • Rob van der Noll

    (Faculty of Economics, Erasmus Universiteit Rotterdam, and CPB Netherlands Bureau for Economic Policy Analysis, The Hague)

Registered author(s):


    We analyze the incentives for incumbent bricks-and-mortar firms and newentrants to start an online retail channel in a differentiated goods market. Tothis end we set up a two-stage model where firms first decide whether or notto build the infrastructure necessary to start an online retail channel and thencompete in prices using the channels they have opened up. Consumers trade-offthe convenience of online shopping and the ease to compare prices, with onlineuncertainties. Without a threat of entry by a third pure online player we findthat for most parameter constellations firms' dominant strategy is not to openan online retail channel as this cannibalizes too much on their conventionalsales. As the cannibalization effect is not present for a pure Internet player,we show that these firms will start online retail channels under a much widerrange of parameter constellations. The threat of entry may force incumbentbricks-and-mortar firms to deter entry by starting up an Internet retail channelthemselves. We also show that a low cost of building up an online retail channelor online shopping conveniences may not be to the benefit of online shoppingas the strategic interaction between firms may be such that no online retailchannel is built when the circumstances seem to be more favourable.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    Bibliographic Info

    Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-038/1.

    as in new window
    Date of creation: 11 Apr 2005
    Date of revision:
    Handle: RePEc:dgr:uvatin:20050038

    Contact details of provider:
    Web page:

    Related research

    Keywords: E-Commerce; Internet; multichannel competition; online uncertainty; online shopping convenience;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Michael Smith & Erik Brynjolfsson, 1999. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Computing in Economics and Finance 1999, Society for Computational Economics 1022, Society for Computational Economics.
    2. Maarten C.W. Janssen & Jose Luis Moraga, 2000. "Pricing, Consumer Search and the Size of Internet Markets," Tinbergen Institute Discussion Papers, Tinbergen Institute 00-042/1, Tinbergen Institute.
    3. Clay, Karen, et al, 2002. "Retail Strategies on the Web: Price and Non-price Competition in the Online Book Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(3), pages 351-67, September.
    4. Maarten C.W. Janssen & Jose Luis Moraga, 2000. "Pricing, Consumer Search and the Size of Internet Markets," Tinbergen Institute Discussion Papers, Tinbergen Institute 00-042/1, Tinbergen Institute.
    5. Friberg, Richard & Ganslandt, Mattias & Sandström, Mikael, 2001. "Pricing Strategies in E-Commerce: Bricks vs. Clicks," Working Paper Series, Research Institute of Industrial Economics 559, Research Institute of Industrial Economics.
    6. Rajiv Lal & Miklos Sarvary, 1999. "When and How Is the Internet Likely to Decrease Price Competition?," Marketing Science, INFORMS, INFORMS, vol. 18(4), pages 485-503.
    7. Oecd, 1998. "Electronic Commerce: Prices and Consumer Issues for Three Products: Books, Compact Discs and Software," OECD Digital Economy Papers, OECD Publishing 32, OECD Publishing.
    8. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    Full references (including those not matched with items on IDEAS)



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:dgr:uvatin:20050038. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.