IDEAS home Printed from https://ideas.repec.org/a/ila/anaeco/v23y2008i2p121-141.html
   My bibliography  Save this article

Fixed Costs, Product Variety, an Welfare on the Internet

Author

Listed:
  • Guillermo Israilevich

    (independent Consultan.)

Abstract

The impact of product variety on welfare has received little attention in the electronic commerce literature. The problem with product variety is that more variety does not necessarily imply higher welfare. This paper finds the conditions under which more variety, if caused by lower fixed costs, implies an unambiguous welfare gain. A calibration to the market of books confirms the intuition that fixed costs –in particular, per-title fixed costs–are much lower at online stores than at conventional stores and that the welfare gains from electronic commerce are likely to be underestimated if one ignores changes in product variety.

Suggested Citation

  • Guillermo Israilevich, 2008. "Fixed Costs, Product Variety, an Welfare on the Internet," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 23(2), pages 121-141, Diciembre.
  • Handle: RePEc:ila:anaeco:v:23:y:2008:i:2:p:121-141
    as

    Download full text from publisher

    File URL: http://www.rae-ear.org/index.php/rae/article/view/84
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jesús Fernández-Villaverde & Juan F. Rubio-Ramírez & Thomas J. Sargent & Mark W. Watson, 2007. "ABCs (and Ds) of Understanding VARs," American Economic Review, American Economic Association, pages 1021-1026.
    2. Canova, Fabio & Ciccarelli, Matteo, 2004. "Forecasting and turning point predictions in a Bayesian panel VAR model," Journal of Econometrics, Elsevier, vol. 120(2), pages 327-359, June.
    3. Daniel Racette & Jacques Raynauld & Christian Sigouin, "undated". "An Up-to-Date and Improved BVAR Model of the Canadian Economy," Staff Working Papers 94-4, Bank of Canada.
    4. Kenny, Geoff & Meyler, Aidan & Quinn, Terry, 1998. "Bayesian VAR Models for Forecasting Irish Inflation," MPRA Paper 11360, University Library of Munich, Germany.
    5. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
    6. Fabián Gredig U. & Klaus Schmidt-Hebbel D. & Rodrigo O. Valdés P., 2008. "The Monetary Policy Horizon in Chile and Other Inflation-Targeting Countries," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 5-27, April.
    7. Rangan Gupta & Moses m. Sichei, 2006. "A Bvar Model For The South African Economy," South African Journal of Economics, Economic Society of South Africa, vol. 74(3), pages 391-409, September.
    8. Christopher A. Sims & Tao Zha, 1999. "Error Bands for Impulse Responses," Econometrica, Econometric Society, vol. 67(5), pages 1113-1156, September.
    9. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    10. Raphael Bergoeing & Raimundo Soto, 2005. "Testing Real Business Cycle Models in a Emerging Economy," Central Banking, Analysis, and Economic Policies Book Series,in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 7, pages 221-260 Central Bank of Chile.
    11. Rómulo A. Chumacero, 2005. "A Toolkit for Analyzing Alternative Policies in the Chilean Economy," Central Banking, Analysis, and Economic Policies Book Series,in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 8, pages 261-302 Central Bank of Chile.
    12. Raphael Bergoeing & Juan Enrique Suarez, 2001. "¿Qué Debemos Explicar? Reportando las Fluctuaciones Agregadas de la Economía Chilena," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 16(1), pages 145-166, June.
    13. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1983. "Forecasting and Conditional Projection Using Realistic Prior Distributions," NBER Working Papers 1202, National Bureau of Economic Research, Inc.
    14. O'Ryan, Raúl & De Miguel, Carlos J. & Pereira, Mauricio & Lagos, Camilo, 2008. "Impactos económicos y sociales de shocks energéticos en Chile: un análisis de equilibrio general," Medio Ambiente y Desarrollo 136, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    15. Timothy Condon & Vittorio Corbo & Jaime de Melo, 2015. "Productivity Growth, External Shocks, and Capital Inflows in Chile: A General Equilibrium Analysis," World Scientific Book Chapters,in: Modeling Developing Countries' Policies in General Equilibrium, chapter 5, pages 87-95 World Scientific Publishing Co. Pte. Ltd..
    16. Robert B. Litterman, 1984. "Specifying vector autoregressions for macroeconomic forecasting," Staff Report 92, Federal Reserve Bank of Minneapolis.
    17. DeJong, David N. & Ingram, Beth F. & Whiteman, Charles H., 2000. "A Bayesian approach to dynamic macroeconomics," Journal of Econometrics, Elsevier, vol. 98(2), pages 203-223, October.
    18. Verónica Mies & Felipe Morandé & Matías Tapia, 2002. "Política Monetaria y Mecanismos de Transmisión: Nuevos Elementos para una Vieja Discusión," Working Papers Central Bank of Chile 181, Central Bank of Chile.
    19. Villani, Mattias, 2001. "Bayesian prediction with cointegrated vector autoregressions," International Journal of Forecasting, Elsevier, vol. 17(4), pages 585-605.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Fixed Costs; Product Variety; Electronic Commerce; Welfare; Internet.;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D60 - Microeconomics - - Welfare Economics - - - General
    • L00 - Industrial Organization - - General - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ila:anaeco:v:23:y:2008:i:2:p:121-141. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcela Perticara). General contact details of provider: http://edirc.repec.org/data/deilacl.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.