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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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    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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