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   Interesting Economics

   

   Ed Postmodern, Aug 24th, 2000 @ 7:01pm

   
   

   The article makes some good points, noting that, unlike in the past when buyers were assumed to react to price changes faster than sellers, online sellers can now react to price changes by their competitors as fast as, if not faster than, the buyers.
   
   Your suggest that as margins tend to increase, new sellers will appear to drive the price back down. That may not work out. A seller already online can adjust prices instantly. A new seller takes a relatively long time to establish an online storefront. The problem is that the new seller can't count on a lot of business by undercutting the competition because the established sellers can instantly lower their prices to match, so that might discourage new sellers from entering the market at all.

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2.  

   Re: Interesting Economics

   

   Mike (profile), Aug 24th, 2000 @ 7:31pm

   
   

   This is true. However, my assumption is that, unlike the airline industry, the concept of implicit collusion is unlikely in the e-commerce industry. There are already a large number of e-commerce sites out there, and about the only claim to fame they can make is that they have the lowest prices available... It really does not make sense for them to continue to raise prices, especially if someone else undercuts them.

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