IDEAS home Printed from https://ideas.repec.org/p/jet/dpaper/dpaper888.html

Competition between heterogenous online and offline firms

Author

Listed:
  • Xiwei,Zhu
  • Gokan,Toshitaka

Abstract

We propose a model with heterogenous online and offline firms in an industry. Online firms need no additional fixed costs to export goods; however, offline firms do. Transaction costs between consumers and sellers are needed only in the online market. Consumers expect the quality of products in the online market but know the quality of products sold by offline firms. We find that low-quality firms with moderate productivity choose to be online firms. We show that a unique equilibrium value of the expected quality exists in the online market if transaction costs are sufficiently low, and if transport costs are sufficiently high. Furthermore, numerical analysis shows that online technology improves welfare, and transaction and transport costs have opposite impacts on welfare.

Suggested Citation

  • Xiwei,Zhu & Gokan,Toshitaka, 2023. "Competition between heterogenous online and offline firms," IDE Discussion Papers 888, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper888
    as

    Download full text from publisher

    File URL: https://ir.ide.go.jp/record/53688/files/IDP000888_001.pdf
    File Function: First version, 2023
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ali Hortaçsu & F. Asís Martínez-Jerez & Jason Douglas, 2009. "The Geography of Trade in Online Transactions: Evidence from eBay and MercadoLibre," American Economic Journal: Microeconomics, American Economic Association, vol. 1(1), pages 53-74, February.
    2. Andreas Lendle & Marcelo Olarreaga & Simon Schropp & Pierre‐Louis Vézina, 2016. "There Goes Gravity: eBay and the Death of Distance," Economic Journal, Royal Economic Society, vol. 126(591), pages 406-441, March.
    3. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669, Elsevier.
    4. Johnson, Robert C., 2012. "Trade and prices with heterogeneous firms," Journal of International Economics, Elsevier, vol. 86(1), pages 43-56.
    5. repec:spo:wpmain:info:hdl:2441/10191 is not listed on IDEAS
    6. Marc J. Melitz & Stephen J. Redding, 2015. "New Trade Models, New Welfare Implications," American Economic Review, American Economic Association, vol. 105(3), pages 1105-1146, March.
    7. repec:spo:wpecon:info:hdl:2441/10191 is not listed on IDEAS
    8. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    9. Chen, Yijuan & Hu, Xiangting & Li, Sanxi, 2017. "Quality differentiation and firms’ choices between online and physical markets," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 96-132.
    10. J. V. Henderson & J. F. Thisse (ed.), 2004. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 4, number 4.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    2. repec:esx:essedp:729 is not listed on IDEAS
    3. Manova, Kalina & Yu, Zhihong, 2017. "Multi-product firms and product quality," Journal of International Economics, Elsevier, vol. 109(C), pages 116-137.
    4. David Comerford & José V Rodríguez Mora & Beata Javorcik, 2019. "The gains from economic integration," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 34(98), pages 201-266.
    5. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    6. Emanuel Orkoh & Robert Teh, 2025. "Inclusive Trade Through Online Presence," Journal of International Development, John Wiley & Sons, Ltd., vol. 37(1), pages 314-333, January.
    7. Shin, Sunny Y. & McKenzie, Jordi & Crosby, Paul, 2024. "Cultural affinity and international trade in motion pictures: Empirical evidence using categorised internet search activity," Economic Modelling, Elsevier, vol. 136(C).
    8. Kazunobu Hayakawa & Hiroshi Mukunoki & Shujiro Urata, 2023. "Can e-commerce mitigate the negative impact of COVID-19 on international trade?," The Japanese Economic Review, Springer, vol. 74(2), pages 215-232, April.
    9. McManus, T. Clay & Schaur, Georg, 2016. "The effects of import competition on worker health," Journal of International Economics, Elsevier, vol. 102(C), pages 160-172.
    10. Fan, Jingting & Tang, Lixin & Zhu, Weiming & Zou, Ben, 2018. "The Alibaba effect: Spatial consumption inequality and the welfare gains from e-commerce," Journal of International Economics, Elsevier, vol. 114(C), pages 203-220.
    11. Kelemen, József, 2013. "Magyarország hét régiójának új gazdaságföldrajzi modellje - paraméterbecslés [The new economic-geography model of Hungarys seven regions - a parameter estimate]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1075-1089.
    12. Valeriano Martínez-San Román & Marta Bengoa & Blanca Sánchez-Robles, 2016. "Foreign direct investment, trade integration and the home bias: evidence from the European Union," Empirical Economics, Springer, vol. 50(1), pages 197-229, February.
    13. Vera Danilina, 2017. "Polarisation of Eco-Labelling Strategies," Working Papers 2017.26, FAERE - French Association of Environmental and Resource Economists.
    14. Okubo, Toshihiro & Picard, Pierre M. & Thisse, Jacques-François, 2010. "The spatial selection of heterogeneous firms," Journal of International Economics, Elsevier, vol. 82(2), pages 230-237, November.
    15. Corinne Bagoulla & Emmanuelle Chevassus-Lozza & Karine Daniel & Carl Gaigné, 2010. "Regional Production Adjustment to Import Competition: Evidence from the French Agro-Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(4), pages 1040-1050.
    16. Imbruno, Michele & Cariolle, Joël & de Melo, Jaime, 2025. "Digital connectivity and firm participation in foreign markets: An exporter-based bilateral analysis," Journal of Development Economics, Elsevier, vol. 177(C).
    17. Ottaviano, Gianmarco I.P., 2005. "National Disparities and Regional Allocation of Resources: A Positive Framework," IDB Publications (Working Papers) 2922, Inter-American Development Bank.
    18. Carsten Eckel & Florian Unger, 2023. "Credit Constraints, Endogenous Innovations, And Price Setting In International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(4), pages 1715-1747, November.
    19. Behrens, Kristian & Gaigne, Carl & Ottaviano, Gianmarco I.P. & Thisse, Jacques-Francois, 2007. "Countries, regions and trade: On the welfare impacts of economic integration," European Economic Review, Elsevier, vol. 51(5), pages 1277-1301, July.
    20. Stephen J. Redding, 2010. "The Empirics Of New Economic Geography," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 297-311, February.
    21. Chen, Natalie & Novy, Dennis, 2012. "On the measurement of trade costs: direct vs. indirect approaches to quantifying standards and technical regulations," World Trade Review, Cambridge University Press, vol. 11(3), pages 401-414, July.

    More about this item

    Keywords

    ;

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    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:jet:dpaper:dpaper888. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michitaka Imamitsu (email available below). General contact details of provider: https://edirc.repec.org/data/idegvjp.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.