Electronic coordination in oligopolistic markets: Impact on transport costs and product differentiation

Arbeitspapier

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.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeiträge ; No. 2002,4

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Allocative Efficiency; Cost-Benefit Analysis ; Oligopoly and Other Imperfect Markets
• Subject: Electronic markets ; Strategic investments ; Transport costs ; Product differentiation ; Elektronische Märkte ; Strategische Investition ; Transportkosten ; Produktdifferentierung ; E-Business ; Oligopol ; Duopol ; Betriebliche Investitionspolitik ; Transportkosten ; Produktdifferenzierung ; Wettbewerb ; Spieltheorie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bandulet, Martin ; Morasch, Karl
• Event: Veröffentlichung
• (who): Universität der Bundeswehr München, Fachgruppe für Volkswirtschaftslehre
• (where): Neubiberg
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/32817