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The impact of e-commerce: It always benefits consumers, but may reduce social welfare

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  • Nakayama, Yuji

Abstract

This paper investigates the impact of e-commerce on social welfare using a linear city model. Our model incorporates the diversity of consumers such that some can purchase the good via the Internet while others cannot. Our main result is as follows. The appearance of e-commerce enhances retail competition and always increases consumer surplus. However, total surplus does not necessarily improve. This is because the equilibrium market division between conventional stores and e-commerce is not socially optimal and efficiency loss of distribution accrues if the population of Internet shoppers is small and/or the cost of e-commerce is high. Our theoretical results indicate that the small e-commerce market share in the Japanese and US economies may result in welfare loss.

Suggested Citation

  • Nakayama, Yuji, 2009. "The impact of e-commerce: It always benefits consumers, but may reduce social welfare," Japan and the World Economy, Elsevier, vol. 21(3), pages 239-247, August.
    • Handle: RePEc:eee:japwor:v:21:y:2009:i:3:p:239-247
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    Cited by:

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    2. Konstantinos Christopoulos & Konstantinos Eleftheriou & Peter Nijkamp, 2022. "The role of pre-pandemic teleworking and E-commerce culture in the COVID-19 dispersion in Europe," Letters in Spatial and Resource Sciences, Springer, vol. 15(1), pages 1-16, April.
    3. Dan Wang, 2023. "Has Electronic Commerce Growth Narrowed the Urban–Rural Income Gap? The Intermediary Effect of the Technological Innovation," Sustainability, MDPI, vol. 15(8), pages 1-16, April.
    4. Wagner, Johannes, 2018. "Distributed Generation in Unbundled Electricity Markets," EWI Working Papers 2018-1, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    5. T. Heikkinen, 2014. "A Hotelling model of spatial competition with local production," Letters in Spatial and Resource Sciences, Springer, vol. 7(2), pages 103-120, July.
    6. Stefano Colombo & Noriaki Matsushima, 2020. "Competition Between Offline and Online Retailers with Heterogeneous Customers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 647-664, November.
    7. Stefano Colombo, 2017. "Traditional banks, online banks, and number of branches," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(2), pages 175-197, June.

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