| This dissertation is a collection of three essays on e-commerce. In the first study, the hotelling spatial model is elaborated under presence of e-commerce. Harold Hotelling (1929) brilliantly answered questions 75 years ago about retail competition and store location, so it is natural to ask how he might react to e-commerce today. He would recognize at once that the bias he found away from socially optimal store location would be moderated, because a comparable effect was anticipated in his paper; he would adapt his model so physical stores would attend more to consumers' transportation costs. His model is easily elaborated also to examine the trade off consumers have between transportation cost to shop at physical stores versus the shipping cost and delay of shopping online. Hotelling's earlier argument that physical stores would be better off if they lobbied against road improvements (to enhance market power) has to be qualified. With e-commerce, higher transportation costs reduce sales at the physical store, and---in some cost ranges---higher transportation costs can now reduce profit at physical stores. No doubt Hotelling would see more effects, but these changes from his model in the actions of physical stores are important consequences of e-commerce.; In the second study, I analyze Internet retailers' shipping strategies. Managing the shipment of goods to consumers is one of the central aspects of retail competition on the Internet. Data from the Internet book retailing industry reveal that firms with lower product prices offer lower shipping fees and higher quality shipping in terms of average delivery time, compared to firms with higher product prices. Models based on imperfect consumer information explain the observed patterns better than perfect information models.; In the third study, I explore whether there is evidence of quality-based price discrimination in e-retailers' shipping schedules. Although it is well known that sellers can price discriminate among consumers with different willingness to pay for quality, the theory has been rarely tested. This paper tests various implications of a standard quality-based price discrimination model using data on shipping schedules offered by online book retailers. In e-commerce, shipping is bundled with the purchase of products, which allows e-retailers to create vertical quality differentiation by offering multiple shipping options. With some amount of market power, it is possible for online sellers to use quality-variants of the same basic product to segment the market of heterogeneous consumers. My results indicate that the quality of a slow shipping option is significantly associated with prices of faster shipping options in a way consistent with predictions of the price discrimination model. In particular, firms who provide worse slow shipping options charge significantly more for their faster shipping options. |
