Electronic coordination in oligopolistic markets: Impact on transport costs and product differentiation
Electronic coordination links markets at different locations that have initially been (partially) separated by transport costs. Rising competitive pressure should in turn affect incentives to differentiate products. In this paper investment decisions concerning transport cost reduction and product differentiation are analyzed in a heterogenous product duopoly where firms compete in two spatially separated markets. We show that firms always have nonnegative incentives to invest in transport cost reduction, while there exist parameter ranges where product differentiation will actually be reduced after an exogenous reduction of transport cost. We also compare social and privat investment incentives for both price strategies (most likely with digital products) and quantity competition (capacity decisions for physical products). Based on these results we discuss in detail how investment decisions are likely to differ from the efficient solution for each of the two kind of products.
|Date of creation:||2002|
|Contact details of provider:|| Postal: Werner-Heisenberg-Weg 39, D-85577 Neubiberg|
Phone: +49(0)89 - 6004-4239
Fax: +49(0)89 - 6014693
Web page: http://wow.w3.rz.unibw-muenchen.de/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:zbw:ubwwpe:20024. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.