Does e-Commerce Always Increase Social Welfare in the Long Run?
We examine the effect of electronic commerce ("e-commerce") on social welfare, in the framework of conventional spatial competition models. We consider the case where both conventional and electronic retailers coexist in equilibrium. We show that e-commerce does not necessarily increase social welfare in the long run. In particular, when electronic retailers have clear cost advantage over conventional retailers, then the advent of e-commerce is shown to reduce social welfare.
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- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, July.
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