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

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Author Info
George Norman
Lynne Pepall
Dan Richards

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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.

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Publisher Info
Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0114.

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Date of creation: 2001
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Handle: RePEc:tuf:tuftec:0114

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Related research
Keywords: versioning; brand-stretching; price discrimination; market structure;

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Find related papers by JEL classification:
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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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.:
  1. Drusilla K. Brown & Rajesh Chadha & Alan V. Deardorff & Robert M. Stern, 2001. "Computational Analysis of the Impact on India of the Uruguay Round and the Forthcoming WTO Trade Negotiations," Discussion Papers Series, Department of Economics, Tufts University 0107, Department of Economics, Tufts University. [Downloadable!]
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  2. Drusilla K. Brown, 2001. "Child Labor in Latin America: Policy and Evidence," Discussion Papers Series, Department of Economics, Tufts University 0110, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  3. Karen Eggleston, 2001. "Multitasking, Competition and Provider Payment," Discussion Papers Series, Department of Economics, Tufts University 0101, Department of Economics, Tufts University. [Downloadable!]
  4. Yannis Ioannides, 2001. "Neighborhood Income Distributions," Discussion Papers Series, Department of Economics, Tufts University 0103, Department of Economics, Tufts University. [Downloadable!]
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  5. Drusilla K. Brown, 2001. "Labor Standards: Where Do They Belong on the International Trade Agenda?," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 89-112, Summer. [Downloadable!] (restricted)
    Other versions:
  6. Hesham M. Abdel-Rahman & George Norman & Ping Wang, 2001. "Skill Differentiation and Income Disparity in a Decentralized Matching Model of North-South Trade," Working Papers 0131, Department of Economics, Vanderbilt University. [Downloadable!]
    Other versions:
  7. Don Fullerton & Gilbert E. Metcalf, 2001. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0106, Department of Economics, Tufts University. [Downloadable!]
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  8. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2001. "Impacts on NAFTA Members of Multilateral and Regional Trading Arrangements and Initiatives and Harmonization of NAFTA's External Tariffs," Working Papers 471, Research Seminar in International Economics, University of Michigan. [Downloadable!]
  9. Yannis Ioannides, 2001. "Topologies of Social Interactions," Discussion Papers Series, Department of Economics, Tufts University 0104, Department of Economics, Tufts University. [Downloadable!]
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  10. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2001. "CGE Modeling and Analysis of Multilateral and Regional Negotiating Options," Working Papers 468, Research Seminar in International Economics, University of Michigan. [Downloadable!]
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  11. Yannis Ioannides, 2001. "Interactive Property Valuations," Discussion Papers Series, Department of Economics, Tufts University 0102, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
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