Consumer Impatience, Technological Innovation, and Market Structure

Abstract

Consumer impatience, i.e. customers' desire to receive online purchases as quickly as possible, is a key factor in shopping decisions. Despite that, there is little empirical research on how consumer impatience is shaping markets, and how markets will change if delivery time is drastically reduced. In this research, we show that consumer impatience significantly affects market structure. Using online purchase data on pizza delivery, we find that it reduces substitution, softens price competition, and allows low-quality pizzerias to survive in the market. The introduction of a technology that reduces delivery time initially decreases market concentration by eroding the market power of pizzerias that benefit from proximity, especially those in the downtown area, while allowing suburban pizzerias to become more competitive. However, when delivery time is reduced substantially (e.g., by more than 75%), this effect reverses: the market becomes increasingly concentrated among high-quality pizzerias, driving low-quality establishments out of the market. We also find that the platform can increase its profits by up to 20% by implementing a price discrimination policy that offers a premium delivery service to the most impatient customers.

Keywords: consumer impatience, delivery, technology, retail competition, platforms, spatial competition