DP9001 Market Structure and Market Performance in E-Commerce

Author(s): Franz Hackl , Michael E Kummer , Rudolf Winter-Ebmer , Christine Zulehner

Publication Date: June 2012

Keyword(s): Market Performance , Market Structure , Markup , Price Dispersion , Product Lifecycle , Retailing

JEL(s): D43 , L11 , L13 , L81

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP9001.asp.asp

We investigate the causal effect of market structure on market performance in the consumer electronics. We combine data from Austria's largest online site for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. We observe input prices of firms, and all their moves in the entry and the pricing game over the whole product lifecycle. Using this information for 70 digital cameras, we generate instrumental variables for the number of firms in the market based on the shops' entry decisions on other product markets in the past. We find that instrumenting is particularly important for estimating the effect of competition on the markup of the price leader.