IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/25796.html
   My bibliography  Save this paper

Competition Between Mail and Electronic Substitutes in the Financial Sector: A Hotelling Approach

Author

Listed:
  • Cremer, Helmuth
  • De Donder, Philippe
  • Dudley, Paul
  • Rodriguez, Frank

Abstract

We build a model where two banks compete for the patronage of consumers by offering them, among other services and products, two forms of transactional media: paper statements and electronic substitutes. Both banks and both products are horizontally differentiated and modeled à la Hotelling(1929). Assuming symmetry of consumer preferences (over banks and, independently, over the two transactional media) and of banks's costs, we obtain that the unique profit-maximizing symmetrical prices reflect both the transactional media marginal costs and the intensity of competition between banks. Most notably, the intensity of consumers preferences for one variant of transactional medium over another has no influence on the profit-maximizing media prices. Also, there is total pass-through of increases in input prices (such as mail price for paper statements) into prices paid by final consumers.

Suggested Citation

  • Cremer, Helmuth & De Donder, Philippe & Dudley, Paul & Rodriguez, Frank, 2012. "Competition Between Mail and Electronic Substitutes in the Financial Sector: A Hotelling Approach," TSE Working Papers 12-298, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:25796
    as

    Download full text from publisher

    File URL: http://www.tse-fr.eu/sites/default/files/medias/doc/by/de_donder/wp_tse_298.pdf
    File Function: Full text
    Download Restriction: no

    Other versions of this item:

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:tse:wpaper:25796. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/tsetofr.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.