Channel Selection And Market Evolution

Nowadays both hype and negative claims about e-procurement permeate the Internet, making the market hesitate over the choice between online and offline. This paper presents one of the very first analyses of market evolution in such a dilemma by applying different methods to different market structures. As for the perfectly competitive market, it takes an evolutionary game perspective. The simulation findings uncover that: either a higher inefficiency level of e-marketplace, or a higher opportunity cost that a seller in the traditional marketplace takes, or a low upper limit of active sellers in e-marketplace, or a higher probability of taking stochastic actions, or less information to form expectation, can be propitious for spurring the shift from the traditional marketplace to the e-marketplace. As for the popular"thorough shift"presumption, this paper puts forward that, an aggressive shift from traditional marketplace to e-marketplace is probably built on an effort by the buyer to constrain his own bargaining power or to share benefits with the supplier. By developing economic models and leveraging the general game theory, this paper also finds out that cost is the critical factor that governs the evolution of monopolistic market, monopolistic competitive market and oligarchic market. At last, this paper releases the"short-term"assumption, and addresses such issues as the economy of scales and the bulwarks in e-marketplace. Basic rules of market dynamics deriving from this paper, together with their broad implications, constitute an initial analytical basis for further research on market evolution.