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Online Channel Strategies of Hybrid Firms and Social Cost  

Cho, Su-Mi (IT Economy Research Team, Electronics and Telecommunications Research Institute)
Lee, Sang-Ho (Department of Economics, Chonnam National University)
Publication Information
Management Science and Financial Engineering / v.13, no.1, 2007 , pp. 55-72 More about this Journal
Abstract
We consider the product differentiation model of online channel competition and examine the strategies of hybrid firms in terms of efficiency. After measuring the social cost of online business strategies, we show that (i) online channel of hybrid firm under blockaded entry may increase the social cost if the firms' delivery cost is sufficiently smaller than the consumer's transportation cost, and (ii) online competition under free entry may increase the social cost if the firms' delivery cost is sufficiently larger than the consumer's transportation cost. Finally, we discuss the strategic incentive of hybrid firms to reduce delivery cost and investigate the effect of the Internet maturity on the social cost.
Keywords
Online Channel; Offline Transaction; Transportation Cost; Delivery Cost; Internet Maturity;
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