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Hit and run or sit and wait? Contestability revisited in a price-comparison site-mediated market
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Haynes, Michelle and Thompson, Steve (2014) Hit and run or sit and wait? Contestability revisited in a price-comparison site-mediated market. International Journal of the Economics of Business, 21 (2). pp. 165-190. doi:10.1080/13571516.2014.912450 ISSN 1357-1516.
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Official URL: http://dx.doi.org/10.1080/13571516.2014.912450
Abstract
The price-comparison site, with its (near-)zero sunk costs of entry, would appear to approximate the “almost perfectly contestable market” envisaged by the contestability theorists where “hit-and-run” entry was conjectured to constrain sellers to zero-profit outcomes. We investigate hit and run using a unique unbalanced panel of 295 digital-camera markets mediated by NexTag.com. We find, however, in line with Farrell (1986a)’s prediction, a bifurcation of strategies with low reputation/smaller participants favouring a hit-and-run strategy involving lower entry prices and shorter forays into the market than their high reputation/larger rivals. Furthermore, the former entrants induce a much larger price response from low-reputation incumbents, reflecting the more intense rivalry for the price-sensitive consumers willing to eschew retailer reputations.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HF Commerce | ||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Electronic commerce, Pricing | ||||
Journal or Publication Title: | International Journal of the Economics of Business | ||||
Publisher: | Routledge | ||||
ISSN: | 1357-1516 | ||||
Official Date: | 2014 | ||||
Dates: |
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Volume: | 21 | ||||
Number: | 2 | ||||
Page Range: | pp. 165-190 | ||||
DOI: | 10.1080/13571516.2014.912450 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Reuse Statement (publisher, data, author rights): | “This is an Accepted Manuscript of an article published by Taylor & Francis in International Journal of the Economics of Business on 15/05/2014, available online http://dx.doi.org/10.1080/13571516.2014.912450 | ||||
Access rights to Published version: | Restricted or Subscription Access | ||||
Date of first compliant deposit: | 9 January 2019 | ||||
Date of first compliant Open Access: | 9 January 2019 | ||||
Open Access Version: |
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