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Versioning, Brand-Stretching, and the Evolution of e-Commerce Markets

  • George Norman
  • Lynne Pepall
  • Dan Richards

This paper offers an analysis of the evolution of e-commerce markets. We develop a model in which an initial group of small, no-name click firms create such markets by offering horizontally differentiated customized or versioned products and competing in prices. Subsequently, a traditional brick firm enters by stretching its brand name into the digital marketplace. Such entry causes many initial entrants to exit. Contrary to much popular and formal literature, we show that the volume of initial entry may well be inefficiently low despite the anticipated later exit. In addition, the conventional relationship between sunk cost and market structure is substantially weakened.

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File URL: http://ase.tufts.edu/econ/papers/200114.pdf
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Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0114.

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Date of creation: 2001
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Handle: RePEc:tuf:tuftec:0114
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  1. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872 Elsevier.
  2. Ioannides, Yannis M., 2003. "Interactive property valuations," Journal of Urban Economics, Elsevier, vol. 53(1), pages 145-170, January.
  3. Chadha, R. & Brown, D.K. & Deardorff, A.V. & Stern, R.M., 2000. "Computational Analysis of the Impact on India of the Uruguay Round and the Forthcoming WTO Trade Negotiations," Working Papers 459, Research Seminar in International Economics, University of Michigan.
  4. Karen Eggleston, 2001. "Multitasking, Competition and Provider Payment," Discussion Papers Series, Department of Economics, Tufts University 0101, Department of Economics, Tufts University.
  5. Drusilla K. Brown, 2001. "Child Labor in Latin America: Policy and Evidence," Discussion Papers Series, Department of Economics, Tufts University 0110, Department of Economics, Tufts University.
  6. Hesham M. Abdel-Rahman & George Norman & Ping Wang, 2001. "Skill Differentiation and Income Disparity in a Decentralized Matching Model of North-South Trade," Vanderbilt University Department of Economics Working Papers 0131, Vanderbilt University Department of Economics.
  7. Drusilla K. Brown, 2001. "Labor Standards: Where Do They Belong on the International Trade Agenda?," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 89-112, Summer.
  8. Ioannides, Yannis M., 2004. "Neighborhood income distributions," Journal of Urban Economics, Elsevier, vol. 56(3), pages 435-457, November.
  9. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2001. "CGE Modeling and Analysis of Multilateral and Regional Negotiating Options," Working Papers 468, Research Seminar in International Economics, University of Michigan.
  10. Yannis Ioannides, 2001. "Topologies of Social Interactions," Discussion Papers Series, Department of Economics, Tufts University 0104, Department of Economics, Tufts University.
  11. Drusilla K. Brown & Alan V. Deardorff & Robert M Stern, 2001. "Impacts on NAFTA Members of Multilateral and Regional Trading Arrangements and Initiatives and Harmonization of NAFTA's External Tariffs," Working Papers 471, Research Seminar in International Economics, University of Michigan.
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