Michelle Haynes
Hit and Run or Sit and Wait? Contestability Revisited in a Price-Comparison Site-Mediated Market
Haynes, Michelle; Thompson, Steve
Authors
Steve Thompson
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.
Citation
Haynes, M., & Thompson, S. (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), 165-190. doi:10.1080/13571516.2014.912450
Journal Article Type | Article |
---|---|
Acceptance Date | May 4, 2014 |
Online Publication Date | May 15, 2014 |
Publication Date | May 15, 2014 |
Deposit Date | Mar 4, 2019 |
Journal | International Journal of the Economics of Business |
Print ISSN | 1357-1516 |
Electronic ISSN | 1466-1829 |
Publisher | Taylor & Francis (Routledge) |
Peer Reviewed | Peer Reviewed |
Volume | 21 |
Issue | 2 |
Pages | 165-190 |
DOI | https://doi.org/10.1080/13571516.2014.912450 |
Keywords | Internet; Contestability; Entry JEL classifications: D4, L1 |
Public URL | https://nottingham-repository.worktribe.com/output/1604716 |
Publisher URL | https://www.tandfonline.com/doi/abs/10.1080/13571516.2014.912450 |
Additional Information | Peer Review Statement: The publishing and review policy for this title is described in its Aims & Scope.; Aim & Scope: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=cijb20 |
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