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Market Structure and Market Performance in E-Commerce

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  • Franz Hackl
  • Michael E. Kummer
  • Rudolf Winter-Ebmer
  • Christine Zulehner

Abstract

We analyze the interaction between market structure and market performance and how it varies over the product cycle. To account for the potential endogeneity in this relation, we use an instrumental variable approach. We combine data from the largest Austrian online market for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. Our results show that instrumenting is important for estimating the empirical effect of competition on the markup of the price leader. One more firm in the market is associated with a reduction of the price leader’s markup which is equivalent to competition between existing firms for an additional three weeks in the product life cycle. Our results support search theoretic models and contradict models of monopolistic competition. Moreover our results support the existence of price dynamics over the product cycle. They also highlight the substitutability between newly innovated and old expiring technologies and how it varies with respect to competitors’ and own brand innovations.

Suggested Citation

  • Franz Hackl & Michael E. Kummer & Rudolf Winter-Ebmer & Christine Zulehner, 2014. "Market Structure and Market Performance in E-Commerce," Economics working papers 2014-04, Department of Economics, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:econwp:2014_04
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    2. Harkonen, Janne & Haapasalo, Harri & Hanninen, Kai, 2015. "Productisation: A review and research agenda," International Journal of Production Economics, Elsevier, vol. 164(C), pages 65-82.
    3. Franz Hackl & Michael Hölzl‐Leitner & Rudolf Winter‐Ebmer & Christine Zulehner, 2021. "Successful retailer strategies in price comparison platforms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(5), pages 1284-1305, July.
    4. Ehsan Mousavi Khaneghah & Nosratollah Shadnoush & Amin Salem, 2017. "Artemis time: A mathematical model to calculate maximum acceptable waiting time in B2C e-commerce," Cogent Business & Management, Taylor & Francis Journals, vol. 4(1), pages 1405509-140, January.
    5. Pérez-Amaral, Teodosio & Valarezo, Angel & López, Rafael & Garín-Muñoz, Teresa & Herguera, Iñigo, 2020. "E-commerce by individuals in Spain using panel data 2008–2016," Telecommunications Policy, Elsevier, vol. 44(4).
    6. Franz Hackl & Michael Hölzl-Leitner & Rudolf Winter-Ebmer & Christine Zulehner, 2018. "Success of firm strategies in e-commerce," Economics working papers 2018-10, Department of Economics, Johannes Kepler University Linz, Austria.
    7. Pérez-Amaral, Teodosio & Valarezo, Angel & López, Rafael & Garín-Muñoz, Teresa & Herguera, Iñigo, 2019. "E-commerce and digital divide in Spain using individual panel data 2008-2016," 30th European Regional ITS Conference, Helsinki 2019 205206, International Telecommunications Society (ITS).
    8. Fernández-Bonilla, Fernando & Gijón, Covadonga & De la Vega, Bárbara, 2022. "E-commerce in Spain: Determining factors and the importance of the e-trust," Telecommunications Policy, Elsevier, vol. 46(1).
    9. Pantano, Eleonora & Vannucci, Virginia, 2019. "Who is innovating? An exploratory research of digital technologies diffusion in retail industry," Journal of Retailing and Consumer Services, Elsevier, vol. 49(C), pages 297-304.
    10. Gonzalo Wandosell & María Concepción Parra-Meroño & Raul Baños, 2019. "Online Store Locator: An Essential Resource for Retailers in the 21st Century," Social Sciences, MDPI, vol. 8(2), pages 1-13, February.
    11. Duch-Brown, Néstor & Grzybowski, Lukasz & Romahn, André & Verboven, Frank, 2017. "The impact of online sales on consumers and firms. Evidence from consumer electronics," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 30-62.

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    More about this item

    Keywords

    Retailing; Product Life cycle; Market Structure; Market Performance; Markup; Price Dispersion;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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