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Electronic coordination in oligopolistic markets: Impact on transport costs and product differentiation

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  • Bandulet, Martin
  • Morasch, Karl

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. -- Durch elektronische Koordination wachsen räumlich getrennte Märkte zusammen, die bislang nur unvollständig ökonomisch integriert waren. Der daraus resultierende verstärkte Wettbewerbsdruck sollte die Anreize der Unternehmen zur Produktdifferenzierung eigentlich erhöhen. Wir analysieren die Interaktion der Investitionsentscheidungen in transportkostensenkende elektronische Koordination und in verstärkte Produktdifferenzierung in einem Duopol mit räumlich getrennten Märkten. Wir zeigen, dass immer ein zumindest schwach positiver Anreiz zur Investition in Transportkostensenkung besteht, während Parameterbereiche existieren in denen die Unternehmen nach einer exogenen Senkung der Transportkosten die Produktdifferenzierung verringern. Des Weiteren vergleichen wir soziale und private Investitionsanreize sowohl bei Preisstrategien (plausibel bei digitalen Gütern) als auch bei Mengenwettbewerb (realistisch als Kapazitätsentscheidung bei physischen Produkten) und diskutieren im Detail, welche Abweichung von der effizienten Entscheidung bei jeder der beiden Produkttypen zu erwarten ist.

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Bibliographic Info

Paper provided by Universität der Bundeswehr München, Economic Research Group in its series Working Papers in Economics with number 2002,4.

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Date of creation: 2002
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Handle: RePEc:zbw:ubwwpe:20024

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Related research

Keywords: Electronic markets; Strategic investments; Transport costs; Product differentiation; Elektronische Märkte; Strategische Investition; Transportkosten; Produktdifferentierung;

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Cited by:
  1. Sell, Friedrich L., 2007. "More about economic and non-economic determinants of (mutual) trust and trustworthiness," Working Papers in Economics 2007,2, Universität der Bundeswehr München, Economic Research Group.

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