The price competition simulation at the trading market in the presence of electronic and traditional trade

Abstract

In the present work, an attempt has been made to apply economic and mathematical methods for the simulation of electronic trading market operation based on price competition between e-trade companies and traditional trade enterprises. The developed price competition model based on the concept of symmetric product differentiation. The results obtained in the present investigation demonstrate that in a mixed strategy, firms sell products at different prices, depending on the price strategy or the volume release strategy. The company that sets the volume, sells more, but at a lower price than its competitor which sets prices. The influence of strategic output exceeds price influence. Thus, the company that sets prices, falls into an unfavorable situation and receives lower profits compared with its competitor with the strategy for the volume of production. The company that has decided to introduce electronic trading technology initially will bear losses.