Reducing buyer search costs: implications for electronic marketplaces
Management Science - Special issue: Frontier research on information systems and economics
Predictors of online buying behavior
Communications of the ACM
Frictionless Commerce? A Comparison of Internet and Conventional Retailers
Management Science
Consumer reactions to electronic shopping on the world wide web
International Journal of Electronic Commerce
Second opinions and online consultations
Decision Support Systems
The Landscape of Electronic Market Design
Management Science
Optimal Multi-Channel Delivery of Expertise: An Economic Analysis
International Journal of Electronic Commerce
Use of Pricing Schemes for Differentiating Information Goods
Information Systems Research
Impact of e-book technology: Ownership and market asymmetries in digital transformation
Electronic Commerce Research and Applications
Donor-to-Nonprofit Online Marketplace: An Economic Analysis of the Effects on Fund-Raising
Journal of Management Information Systems
Competitive Behavior-Based Price Discrimination for Software Upgrades
Information Systems Research
Switching Costs, Network Effects, and Competition in the European Mobile Telecommunications Industry
Information Systems Research
Information Systems Research
Ushering Buyers into Electronic Channels: An Empirical Analysis
Information Systems Research
Price Discovery in the U.S. Treasury Market: Automation vs. Intermediation
Management Science
Telematics and Informatics
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Technology-driven commerce channels, such as the Web, possess several unique features that differentiate them from traditional channels. The interaction between firms operating across these differentiated channels involves interesting competitive dynamics that cannot be captured by isolated models of electronic markets. This paper develops a stylized spatial differentiation model to examine the impact of differences in channel flexibility, network externalities, and switching costs on competition between online, traditional, and hybrid firms. A basic model highlighting the moderating influence of the hybrid firm on both channels is extended to account for differential network externalities and switching costs across the two channels. Our analysis indicates that while network effects as well as switching costs lead to the tipping of markets, such tipping occurs primarily due to the moderating effects of the competing channel. More importantly, with network effects an increased market share does not translate into higher profits. Contradictory to conventional wisdom, our results indicate that in a static market, consumers rather than firms, benefit from increasing network externalities, with competitive effects outweighing the surplus-extraction abilities of firms. Our results also highlight the importance of alternative revenue streams and provide insights for firms grappling with issues of channel choice as well as integration and divestiture.