Information-Processing, Technological Progress, and Retail Markets Dynamics

Posted: 18 Dec 2009

See all articles by Jacek Cukrowski

Jacek Cukrowski

CASE - Center for Social and Economic Research

Manfred M. Fischer

Vienna University of Economics and Business - Institute for Economic Geography and GIScience, Department of Socioeconomics

Date Written: 2002

Abstract

The hypothesis in this paper is that the existence of retail markets may not necessarily be determined by spatial factors and increasing return in transportation (or increasing returns in retailing), but can be explained by the rational behaviour of firms operating in a stochastic environment. It is shown that demand uncertainty can serve as an independent source of retail trade. Consequently, the ability of firms to process information and predict demand (i.e. to decrease demand uncertainty) may affect the characteristics of retail markets. The results indicate that risk-averse firms always devote resources to demand forecasting; producers are better off trading with retailers than with final consumers; and the volume of output supplied through retail markets is greater than it would be if producers traded directly with consumers (thus benefiting social welfare). Furthermore, the contribution shows that technological progress in data-processing, which allows for cheaper and better predictions of market demand, increases the number of firms operating in retail markets.

Keywords: Retail trade, Demand uncertainty, Information-processing, Technological progress

JEL Classification: D73

Suggested Citation

Cukrowski, Jacek and Fischer, Manfred M., Information-Processing, Technological Progress, and Retail Markets Dynamics (2002). Information Economics and Policy, Vol. 14, No. 1, 2002. Available at SSRN: https://ssrn.com/abstract=1523723

Jacek Cukrowski

CASE - Center for Social and Economic Research ( email )

Center for Social and Economic Research,
Warsaw
Poland

Manfred M. Fischer (Contact Author)

Vienna University of Economics and Business - Institute for Economic Geography and GIScience, Department of Socioeconomics ( email )

Welthandelsplatz 1, D4
Vienna, 1020
Austria

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