Tuesday, January 4, 2011
Posted by D. Daniel Sokol
Alexander Matros (University of South Carolina) and Andriy Zapechelnyuk (Queen Mary, University of London) discuss Competition of E-Commerce Intermediaries.
ABSTRACT: In e-commerce, where information collection is essentially costless and geographic location of traders matters very little, fierce competition between providers of similar services is expected. We consider a model where two e-commerce intermediaries (internet shops) compete for sellers. We show that two non-identical shops may coexist in equilibrium if the population of sellers is sufficiently differentiated in their time preferences. In such an equilibrium less patient sellers choose the more popular (with a higher rate of arrival of new buyers) and more expensive shop, while more patient sellers prefer the less popular and cheaper one.