We thank Tim Bresnahan, Francine Lafontaine, Michael Rauh and participants at multiple seminars for valuable suggestions. We gratefully acknowledge financial support for this research from the NET Institute (http://www.NETinst.org) and the NSF (award no. SES-0242031).
E-Commerce and the Market Structure of Retail Industries*
Version of Record online: 14 OCT 2009
© The Author(s). Journal compilation © Royal Economic Society 2009
The Economic Journal
Volume 120, Issue 545, pages 651–682, June 2010
How to Cite
Goldmanis, M., Hortaçsu, A., Syverson, C. and Emre, Ö. (2010), E-Commerce and the Market Structure of Retail Industries. The Economic Journal, 120: 651–682. doi: 10.1111/j.1468-0297.2009.02310.x
- Issue online: 1 JUN 2010
- Version of Record online: 14 OCT 2009
- Submitted: 25 October 2005 Accepted: 3 March 2009
This article examines the effect of the advent and diffusion of e-commerce on supply-side industry structure. We specify a general industry model involving consumers with differing search costs buying products from heterogeneous producers. We interpret e-commerce as a reduction in consumers’ search costs. We show how it reallocates market shares from high-cost to low-cost producers. We test the model using US data for three industries: travel agencies, bookstores and new car dealers. Each industry exhibits the market share shifts predicted by the model but the mechanisms vary, ranging from aggregate factors in the travel industry to local-market factors in the other two industries.