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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 - ENGREF - Ecole Nationale du Génie Rural, des Eaux et des Forêts - INRA - Institut National de la Recherche Agronomique)

  • Hervé Tanguy

    (CECO - Laboratoire d'économétrie de l'École polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique)


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.

Suggested Citation

  • Jacques Laye & Hervé Tanguy, 2004. "Are neighbors welcome ? e-buyer search, price competition and coalition strategy in the Internet retailing," Working Papers hal-00242928, HAL.
  • Handle: RePEc:hal:wpaper:hal-00242928
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    References listed on IDEAS

    1. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
    2. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
    3. 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.
    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 219-227, 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. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    7. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    8. Gabszewicz, Jean J. & Garella, Paolo, 1986. "Subjective price search and price competition," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 305-316, September.
    9. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
    10. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
    11. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
    12. 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.
    13. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
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    Cited by:

    1. Jacques Laye & Charis Lina & Herve Tanguy, 2006. "E-consumers' search and emerging structure of B-to-C coalitions," Computing in Economics and Finance 2006 374, Society for Computational Economics.


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