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Information-Processing, Technological Progress, and Retail Markets Dynamics

Cukrowski, Jacek and Fischer, Manfred M. (1999) Information-Processing, Technological Progress, and Retail Markets Dynamics. Discussion Papers of the Institute for Economic Geography and GIScience, 67/99. WU Vienna University of Economics and Business, Vienna.

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Abstract

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)

Item Type: Paper
Keywords: retail trade / demand uncertainty / information-processing / technological progress
Classification Codes: JEL D73
Divisions: Departments > Sozioökonomie > Wirtschaftsgeographie und Geoinformatik > Fischer
Depositing User: ePub Administrator
Date Deposited: 12 May 2014 13:10
Last Modified: 12 May 2014 22:12
URI: http://epub.wu.ac.at/id/eprint/4143

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