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Electronic Commerce and Retail Channel Substitution

Tinbergen Institute Working Paper No. 02-042/1

41 Pages Posted: 15 May 2002  

Maarten Janssen

University of Vienna

Rob van der Noll

University of Amsterdam - SEO Economic Research

Date Written: April 2002

Abstract

We analyze a market where firms compete in a conventional and an electronic retail channel. Consumers easily compare prices online, but some incur purchase uncertainties on the online channel. We investigate the market shares of the two retail channels and the prices that are charged. We find that the share of the electronic channel is decreasing in the size of the uncertainty. Furthermore, searching consumers do not always buy. They drop out when the uncertainty associated with buying online is not offset by a low price. Finally, the model exhibits price dispersion and the expected price is increasing in the magnitude of the online purchase uncertainty.

Keywords: E-Commerce, Internet, multichannel competition, price dispersion, online uncertainty, online confidence

JEL Classification: D43, L13, M30

Suggested Citation

Janssen, Maarten and van der Noll, Rob, Electronic Commerce and Retail Channel Substitution (April 2002). Tinbergen Institute Working Paper No. 02-042/1. Available at SSRN: https://ssrn.com/abstract=309679 or http://dx.doi.org/10.2139/ssrn.309679

Maarten C. W. Janssen (Contact Author)

University of Vienna ( email )

Vienna, A-1210
Austria

Rob Van der Noll

University of Amsterdam - SEO Economic Research ( email )

Roetersstraat 29
Amsterdam, 1018 WB
Netherlands
+31205251687 (Phone)
+31205251686 (Fax)

HOME PAGE: http://www.seo.nl/en/organisation/staff/rob-van-der-noll-competition-regulation/

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