Analysis of price competition and strategic implications for heterogeneous market structure

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This paper examines strategic competition behavior in heterogeneous market structure where both conventional offline and online firms coexist in equilibrium and draws strategic implications with some remarks on welfare. Research on the price competition between conventional offline and online firms has been done through empirical approaches; however, the results are conflicting. This paper reconciles the existing conflicting empirical findings on price levels between conventional offline and online firms through a theoretical approach. We find that as the online market matures, prices in both conventional and online firms drop, and the price in the online firm can be higher than that in a conventional offline firm. Furthermore, if convenience associated with the online increases, the online price tends to exceed the conventional offline price. © 2004 Elsevier Inc. All rights reserved.
Publisher
Elsevier Inc.
Issue Date
2005
Language
English
Citation

INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE, v.14, no.4, pp.455 - 468

ISSN
1059-0560
URI
http://hdl.handle.net/10203/3888
Appears in Collection
MT-Journal Papers(저널논문)
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