Electronic commerce, consumer search and retailing cost reduction

Abstract

This paper explains four things in a unified way. First, how e-commerce can generate price equilibria, where physical shops either compete with virtual shops for consumers with Internet access, or alternatively, sell only to consumers with no Internet access. Second, how these price equilibria might involve price dispersion on-line. Third, why prices may be higher on-line. Fourth, why established firms can, but need not, be more reluctant than newly created firms to adopt ecommerce. For this purpose we develop a model where e-commerce reduces consumers’ search costs, involves trade-offs for consumers, and reduces retailing costs.

Se explica la competencia entre las tiendas físicas y las tiendas virtuales, concluyendose cómo el comercio electrónico reduce los costes de búsqueda de los consumidores, implica un "trade-off" para los consumidores, y disminuye los costes de producción de las empresas.