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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 21, No. 3, pp.467-483
ISSN: 1225-0279 (Print)
Print publication date 31 Aug 2008
Received 28 Jan 2008 Revised 10 Jul 2008

Asset Ownership, Business Format and Market Structure of Online Retail Market

Wonchang Jang ; Ilsoon Shin
Assistant Professor, School of Economics, Inha University, 253, Yonghyun-Dong, Nam-Gu, Incheon, 402-751, Korea, Tel: +82-32-860-7786, Fax: +82-32-860-7772 wjang@inha.ac.kr
Associate Professor, School of Economics, Inha University, 253, Yonghyun-Dong, Nam-Gu, Incheon, 402-751, Korea, Tel: +82-32-860-7784, Fax: +82-32-860-7772 ishin@inha.ac.kr

JEL Classification: D23, L81

Abstract

The domestic online retail market consists of three different business models: independent retailer, merchant and marketplace. When we look at the growth process of these business models, some interesting characteristics are found; first, the average sales amount of the independent model has been decreasing steadily for several years, and second, the market share of the marketplace model shows a steady and significant growth. This paper investigates these characteristics with a formal theoretical model. Based on the asset ownership and business format, the model explicitly considers the retails’ decision on the online retail business model. By introducing several parameters to affect the retailers’ decision, we found that the model’s prediction is consistent with the characteristics aforementioned.

Keywords:

Online retail market, Marketplace, Business format, Asset ownership, Market structure

Acknowledgments

The authors have benefited from the comments of anonymous referees and gratefully acknowledge the financial support of the Inha University.

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