School of Economics and Finance

No. 675: Competition of E-Commerce Intermediaries

Alexander Matros , University of South Carolina
Andriy Zapechelnyuk , Queen Mary, University of London

November 1, 2010

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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.

J.E.L classification codes: C73, D43, D82

Keywords:E-commerce, Intermediary, Competition, Listing fee, Closing fee