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Shopping Versus Shipping: A Spatial Competition Theory of E-commerce

Author

Listed:
  • Gokan,Toshitaka
  • Thisse,Jacques-François
  • Zhu,Xiwei

Abstract

We study competition between offline and online retailers, as well as competition between two polar cases of online firms. We propose a parsimonious model that incorporates shopping costs, shipping costs, distaste costs, and consumer taste heterogeneity in a duopoly. We first assume that e-retailers adopt uniform delivered pricing. As delivery technologies improve, e-retailers become able to implement personalized delivered pricing. Consumers are better-off under personalized delivered pricing. However, e-retailers compete in a Hero game in which they choose a combination of uniform delivered pricing and personalized delivered pricing.

Suggested Citation

  • Gokan,Toshitaka & Thisse,Jacques-François & Zhu,Xiwei, 2026. "Shopping Versus Shipping: A Spatial Competition Theory of E-commerce," IDE Discussion Papers 1007, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper1007
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • 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
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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