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E-Commerce and the Market Structure of Retail Industries

Author

Listed:
  • Maris Goldmanis
  • Ali Hortaçsu
  • Chad Syverson
  • Önsel Emre

Abstract

This article examines the effect of the advent and diffusion of e-commerce on supply-side industry structure. We specify a general industry model involving consumers with differing search costs buying products from heterogeneous producers. We interpret e-commerce as a reduction in consumers' search costs. We show how it reallocates market shares from high-cost to low-cost producers. We test the model using US data for three industries: travel agencies, bookstores and new car dealers. Each industry exhibits the market share shifts predicted by the model but the mechanisms vary, ranging from aggregate factors in the travel industry to local-market factors in the other two industries. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

Suggested Citation

  • Maris Goldmanis & Ali Hortaçsu & Chad Syverson & Önsel Emre, 2010. "E-Commerce and the Market Structure of Retail Industries," Economic Journal, Royal Economic Society, vol. 120(545), pages 651-682, June.
  • Handle: RePEc:ecj:econjl:v:120:y:2010:i:545:p:651-682
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jason Allen & Robert Clark & Jean-François Houde, 2008. "Market Structure and the Diffusion of E-Commerce: Evidence from the Retail Banking Industry," Staff Working Papers 08-32, Bank of Canada.
    2. James D. Dana Jr. & Eugene Orlov Jr., 2014. "Internet Penetration and Capacity Utilization in the US Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 106-137, November.
    3. Yinbo Feng & Ming Hu, 2017. "Blockbuster or Niche? Competitive Strategy under Network Effects," Working Papers 17-13, NET Institute.
    4. repec:eee:touman:v:48:y:2015:i:c:p:329-342 is not listed on IDEAS
    5. Zentner, Alejandro, 2008. "Online sales, Internet use, file sharing, and the decline of retail music specialty stores," Information Economics and Policy, Elsevier, vol. 20(3), pages 288-300, September.
    6. Pozzi, Andrea & Schivardi, Fabiano, 2015. "Entry Regulation in Retail Markets," CEPR Discussion Papers 10836, C.E.P.R. Discussion Papers.
    7. Robert Clark & Jason Allen & Jean-Francois Houde, 2010. "Price negotiation in differentiated product markets: An analysis of the market for insured mortgages in Canada," 2010 Meeting Papers 1072, Society for Economic Dynamics.
    8. Emek Basker & Lucia Foster & Shawn Klimek, 2015. "Customer-Labor Substitution: Evidence from Gasoline Stations," Working Papers 15-45, Center for Economic Studies, U.S. Census Bureau.
    9. Falk, Martin & Hagsten, Eva, 2015. "E-commerce trends and impacts across Europe," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 357-369.
    10. Ethan M. J. Lieber, 2017. "Does It Pay to Know Prices in Health Care?," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 154-179, February.
    11. Simon P. Anderson & André de Palma, 2009. "Information congestion," RAND Journal of Economics, RAND Corporation, pages 688-709.
    12. Ginger Zhe Jin & Marc Rysman, 2015. "Platform Pricing at Sports Card Conventions," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 704-735, December.
    13. Lendle, Andreas & Olarreaga, Marcelo & Schropp, Simon & Vézina, Pierre-Louis, 2012. "There goes gravity: how eBay reduces trade costs," CEPR Discussion Papers 9094, C.E.P.R. Discussion Papers.
    14. Mohammad Jamali & Hatra Voghouei & Nor Md Nor, 2014. "Information technology and survival of firms," Netnomics, Springer, vol. 15(2), pages 107-119, September.
    15. repec:eee:touman:v:33:y:2012:i:1:p:205-214 is not listed on IDEAS
    16. Jidong Zhou & Andrew Rhodes, 2015. "A Search Theory of Retail Market Structure," 2015 Meeting Papers 409, Society for Economic Dynamics.
    17. Keller, Jonas & von der Gracht, Heiko A., 2014. "The influence of information and communication technology (ICT) on future foresight processes — Results from a Delphi survey," Technological Forecasting and Social Change, Elsevier, vol. 85(C), pages 81-92.
    18. Fershtman, Chaim & Fishman, Arthur & Zhou, Jidong, 2013. "Search and Categorization," MPRA Paper 53166, University Library of Munich, Germany.
    19. repec:eee:touman:v:52:y:2016:i:c:p:327-339 is not listed on IDEAS

    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L8 - Industrial Organization - - Industry Studies: Services

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