Emergence of Electronic Markets: Implication of Declining Transport Costs on Firm Profits and Consumer Surplus
Electronic coordination may drastically reduce transport costs, especially for digital or digitalizable products where local markets may actually shrink to a point in space. In the present paper we use a model with differentiated products to analyze the impact of declining transport costs on profits and consumer surplus. While consumers always gain, the effect on producers depends on the degree of product differentiation and the magnitude of transport costs in the electronic market mode. Profits do only rise if products are substantially differentiated – in this case the positive effect of an extended consumer base due to the preference for product differentiation dominates the negative effect of intensified competition. This result is amplified if transport costs in the electronic market mode are substantial. In this case profits only increase if products are almost independent.
|Date of creation:||Jul 2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 821 598 4060
Fax: +49 821 598 4217
Web page: http://www.wiwi.uni-augsburg.de/vwl/institut
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
- Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
- Bouckaert, Jan, 2000.
"Monopolistic competition with a mail order business,"
Elsevier, vol. 66(3), pages 303-310, March.
- Bouckaert, J., 1995. "Momopolistic Competition with a Mail Order Business," Papers 9562, Tilburg - Center for Economic Research.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
When requesting a correction, please mention this item's handle: RePEc:aug:augsbe:0196. 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: (Dr. Albrecht Bossert)
If references are entirely missing, you can add them using this form.