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Market structure and market performance in E-commerce

Author

Listed:
  • Hackl, Franz
  • Kummer, Michael E.
  • Winter-Ebmer, Rudolf
  • Zulehner, Christine

Abstract

We analyze the interaction between market structure and market performance and how it varies over the product cycle. To account for the potential endogeneity in this relation, we use an instrumental variable approach. We combine data from the largest Austrian online market for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. Our results show that instrumenting is important for estimating the empirical effect of competition on the markup of the price leader. One more firm in the market is associated with a reduction of the price leader׳s markup which is equivalent to competition between existing firms for an additional 3weeks in the product life cycle. Our results support search theoretic models and contradict models of monopolistic competition. Moreover our results support the existence of price dynamics over the product cycle. They also highlight the substitutability between newly innovated and old expiring technologies and how it varies with respect to competitors׳ and own brand innovations.

Suggested Citation

  • Hackl, Franz & Kummer, Michael E. & Winter-Ebmer, Rudolf & Zulehner, Christine, 2014. "Market structure and market performance in E-commerce," European Economic Review, Elsevier, vol. 68(C), pages 199-218.
  • Handle: RePEc:eee:eecrev:v:68:y:2014:i:c:p:199-218
    DOI: 10.1016/j.euroecorev.2014.03.007
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    Cited by:

    1. Harkonen, Janne & Haapasalo, Harri & Hanninen, Kai, 2015. "Productisation: A review and research agenda," International Journal of Production Economics, Elsevier, vol. 164(C), pages 65-82.
    2. repec:taf:oabmxx:v:4:y:2017:i:1:p:1405509 is not listed on IDEAS
    3. repec:eee:indorg:v:52:y:2017:i:c:p:30-62 is not listed on IDEAS

    More about this item

    Keywords

    Retailing; Product life cycle; Market structure; Market performance; Markup; Price dispersion;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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