Reports
Discussion Papers
No.1007 Shopping Versus Shipping: A Spatial Competition Theory of E-commerce
by Toshitaka Gokan, Jacques-François Thisse, Xiwei Zhu
March 2026
ABSTRACT
We study competition between offline and online retailers, as well as competition between two polar cases of online firms. We propose a parsimonious model that incorporates shopping costs, shipping costs, distaste costs, and consumer taste heterogeneity in a duopoly. We first assume that e-retailers adopt uniform delivered pricing. As delivery technologies improve, e-retailers become able to implement personalized delivered pricing. Consumers are better-off under personalized delivered pricing. However, e-retailers compete in a Hero game in which they choose a combination of uniform delivered pricing and personalized delivered pricing.
Keywords: Online retailing, personalized prices, uniform delivered price
JEL classification: L13, L81, R10
PDF available at http://hdl.handle.net/2344/0002001828
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