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Versioning, Brand-Stretching, and the Evolution of e-Commerce Markets

Author

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  • George Norman
  • Lynne Pepall
  • Dan Richards

Abstract

This paper offers an analysis of the evolution of e-commerce markets. We develop a model in which an initial group of small, no-name click firms create such markets by offering horizontally differentiated customized or versioned products and competing in prices. Subsequently, a traditional brick firm enters by stretching its brand name into the digital marketplace. Such entry causes many initial entrants to exit. Contrary to much popular and formal literature, we show that the volume of initial entry may well be inefficiently low despite the anticipated later exit. In addition, the conventional relationship between sunk cost and market structure is substantially weakened.

Suggested Citation

  • George Norman & Lynne Pepall & Dan Richards, 2001. "Versioning, Brand-Stretching, and the Evolution of e-Commerce Markets," Discussion Papers Series, Department of Economics, Tufts University 0114, Department of Economics, Tufts University.
    • Handle: RePEc:tuf:tuftec:0114
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    Cited by:

    1. Elena BADARAU, 2014. "Competition: E-Com Versus Traditional Trade," ECONOMY AND SOCIOLOGY: Theoretical and Scientifical Journal, Socionet;Complexul Editorial "INCE", issue 3, pages 190-200.
    2. Bernhardt, Dan & Liu, Qihong & Serfes, Konstantinos, 2007. "Product customization," European Economic Review, Elsevier, vol. 51(6), pages 1396-1422, August.

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    More about this item

    Keywords

    versioning; brand-stretching; price discrimination; market structure;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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