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Are neighbors welcome ? e-buyer search, price competition and coalition strategy in the Internet retailing

  • Jacques Laye

    (LEF - Laboratoire d'Economie Forestière - Institut national de la recherche agronomique (INRA) - Ecole Nationale du Génie Rural des Eaux et Forêts)

  • Hervé Tanguy

    (CECO - Laboratoire d'econometrie de l'école polytechnique - CNRS - Polytechnique - X)

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    We study the forces that drive the phenomenon of aggregation of merchant Web sites (B-to-C) competing in a differentiated electronic market, where the search cost for the consumers is independent from the adaptation/transportation cost they incur when the good they find does not match with their preference. We focus on the possibility for Internet sites to coalesce, which results in a reduction of the search cost to find other sites within the coalition. We do the static comparative of coalition structures (depending on whether there is little or high differentiation between partners), when firms compete in price. We find that firms prefer to coalesce with highly differentiated partners, and set in this case lower prices.

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    Paper provided by HAL in its series Working Papers with number hal-00242928.

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    Date of creation: 2004
    Date of revision:
    Handle: RePEc:hal:wpaper:hal-00242928
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    1. Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
    3. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
    4. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
    5. Eaton, B Curtis & Lipsey, Richard G, 1982. "An Economic Theory of Central Places," Economic Journal, Royal Economic Society, vol. 92(365), pages 56-72, March.
    6. Gabszewicz, J.J. & Garella, P., 1985. "Subjective price search and price competition," CORE Discussion Papers 1985009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Henkel, Joachim & Stahl, Konrad & Walz, Uwe, 2000. "Coalition Building in a Spatial Economy," Journal of Urban Economics, Elsevier, vol. 47(1), pages 136-163, January.
    8. repec:oup:qjecon:v:98:y:1983:i:2:p:185-99 is not listed on IDEAS
    9. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
    10. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
    11. Eric Giraud-Héraud & Hakim Hammoudi & Mahdi Mokrane, 2003. "Multiproduct firm behaviour in a differentiated market," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 41-61, February.
    12. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
    13. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
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