Reducing buyer search costs: implications for electronic marketplaces
Management Science - Special issue: Frontier research on information systems and economics
Information Systems Research
Organizing Distribution Channels for Information Goods on the Internet
Management Science
A Multichannel Model of Separating Equilibrium in the Face of the Digital Divide
Journal of Management Information Systems
Impact of e-book technology: Ownership and market asymmetries in digital transformation
Electronic Commerce Research and Applications
Analysis of emerging technology adoption for the digital content market
Information Technology and Management
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In this research we study how existing market coverage affects the outcome of the Internet channel entry game between an existing retailer and a new entrant. A market is not covered when some consumers with low reservation prices are priced out by existing retailers and do not purchase. In a model with multiple existing retailers and a potential new entrant, we demonstrate that when entry costs are equal, one of the existing retailers enters the Internet channel first. However, if the market is covered by existing retailers before entry, then because of the threat of Internet channel entry by the potential new entrant, retailer entry cannibalizes existing retail profits--cannibalizing at a loss. In addition, if a potential new entrant has a slight advantage in Internet channel entry costs and the market is not covered by existing retailers, then the new entrant enters the Internet channel first. If the market is covered by existing retailers, then the new entrant must have a larger Internet channel entry cost advantage to be first to enter the Internet channel.