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Does e-Commerce Always Increase Social Welfare in the Long Run?

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Listed:
  • Yuji Nakayama

    (College of Economics, Osaka Prefecture University)

  • Kiyohiko G. Nishimura

    (Faculty of Economics, University of Tokyo)

Abstract

We examine the effect of electronic commerce ("e-commerce") on social welfare, in the framework of conventional spatial competition models. We consider the case where both conventional and electronic retailers coexist in equilibrium. We show that e-commerce does not necessarily increase social welfare in the long run. In particular, when electronic retailers have clear cost advantage over conventional retailers, then the advent of e-commerce is shown to reduce social welfare.

Suggested Citation

  • Yuji Nakayama & Kiyohiko G. Nishimura, 2002. "Does e-Commerce Always Increase Social Welfare in the Long Run?," CIRJE F-Series CIRJE-F-144, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2002cf144
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2002/2002cf144.pdf
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    3. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
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