nep-ict New Economics Papers
on Information and Communication Technologies
Issue of 2007‒04‒21
two papers chosen by
Walter Frisch
University Vienna

  1. "Bargaining and Fixed Price Offers: How Online Intermediaries are Changing New Car Transactions" By Michael A. Arnold; Thierry Pénard
  2. Concerning Technology Adoption and Inequality By Radhika Lahiri; Shyama Ratnasiri

  1. By: Michael A. Arnold (Department of Economics,University of Delaware); Thierry Pénard (Department of Economics,University of Rennes)
    Abstract: The Internet has introduced a variety of online buying services that expand the reach of sellers and reduce search costs for buyers. In markets in which traditional outlets establish prices through bargaining, these online intermediaries have also altered the price setting process. Perhaps the most well known example is which provides referral services in the automobile market. By using Autobytel, a buyer can obtain a non-negotiable price offer as an alternative to bargaining with a car dealership. To understand the effect of online referral systems on the price setting process, we construct a theoretical model of oligopolistic price competition in which one dealership has an exclusive contract with a referral intermediary. We derive market conditions under which the fixed price offered through the referral system will or will not be lower than offline (bargained) prices. Our model provides theoretical insights relevant to results in the empirical literature addressing the role that Autobytel and other infomediaries play in online markets.
    Keywords: online markets, E-commerce, intermediary, autobytel, pricing
    JEL: D4 D83 L19 L89
  2. By: Radhika Lahiri; Shyama Ratnasiri
    Abstract: Empirical evidence suggests that there has been a divergence over time in income distributions across countries and within countries. Furthermore, developing economies show a great deal of diversity in their growth patterns during the process of economic development. For example, some of these countries converge rapidly on the leaders, while others stagnate, or even experience reversals and declines in their growth processes. In this paper we study a simple dynamic general equilibrium model with household specific costs of technology adoption which is consistent with these stylized facts. In our model, growth is endogenous, and there are two-period lived overlapping generations of agents, assumed to be heterogeneous in their initial holdings of wealth and capital. We find that in a special case of our model, with costs associated with the adoption of more productive technologies fixed across households, inequalities in wealth and income may increase over time, tending to delay the convergence in international income differences. The model is also capable of explaining some of the observed diversity in the growth pattern of transitional economies. According to the model, this diversity may be the result of variability in adoption costs over time, or the relative position of a transitional economy in the world income distribution. In the more general case of the model with household specific adoption costs, negative growth rates during the transitional process are also possible. The model’s prediction that inequality has negative impact on technology adoption is supported by empirical evidence based on a cross country data set.
    Keywords: inequality, technology adoption, international income differences, altruism, negative growth rates
    Date: 2007–04–20

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