Search costs in electronic markets: market equilibrium and corporation strategy

In this paper, a model is built to analyse the influences of search costs on market equilibrium. According to the results of a simulation, we conclude that the equilibrium prices of e-markets are not always lower than those of conventional markets, especially under certain combinations of return costs and search costs. In addition, some managerial insights are derived from the simulation results, e.g., that information technology doesn’t always create intensive price competition. Companies can soften competition in many ways in the e-market, such as differentiating themselves on the basis of search costs.