Information-Processing, Technological Progress, and Retail Markets Dynamics

Jacek Cukrowski, Manfred M. Fischer

    Publikation: Working/Discussion PaperWU Working Paper

    27 Downloads (Pure)


    The hypothesis in this paper is that the existence of retail markets may not necessarily be
    determined by spatial factors and increasing return in transportation (or increasing returns in retailing),
    but can be explained by the rational behaviour of firms operating in a stochastic environment. It is shown
    that demand uncertainty can serve as an independent source of retail trade. Consequently, the ability of
    firms to process information and predict demand (i.e., to decrease demand uncertainty) may affect the
    characteristics of retail markets. The results indicate that risk-averse firms always devote resources to
    demand forecasting; producers are better off trading with retailers than with final consumers; and the
    volume of output supplied through retail markets is greater than it would be if producers traded directly
    with consumers (thus benefiting social welfare). Furthermore, the paper shows that technological progress
    in data-processing, which allows for cheaper and better predictions of market demand, increases the
    number of firms operationg in retail markets. (authors' abstract)
    HerausgeberWU Vienna University of Economics and Business
    PublikationsstatusVeröffentlicht - 1 März 1999


    ReiheDiscussion Papers of the Institute for Economic Geography and GIScience

    WU Working Paper Reihe

    • Discussion Papers of the Institute for Economic Geography and GIScience