Competition between firms can occur through innovation in organizational form, as each uses a distinctive institution to offer customers lower prices and better services. This paper analyzes competition between two institutions of retail trade, mail order and retail stores, during the period 1910 to 1940. Transaction costs, specifically costs of physical distribution and costs of informing the customer, are shown to make mail order more efficient at low customer densities and with products that can be easily described. Regressions on time series data and cross-section data confirm the theoretical propositions.
ASJC Scopus subject areas
- Economics and Econometrics
- Organizational Behavior and Human Resource Management