COMPETITION IN ORGANIZATIONAL FORM - MAIL-ORDER VERSUS RETAIL STORES,1910-1940

Competition between firms can occur through innovation in organization al form, as each uses a distinctive institution to offer customers low er prices and better services. This paper analyzes competition between two institutions of retail trade, mail order and retail stores, durin g the period 1910 to 1940. Transaction costs, specifically costs of ph ysical distribution and costs of informing the customer, are shown to make mail order more efficient at low customer densities and with prod ucts that can be easily described. Regressions on time series data and cross-section data confirm the theoretical propositions.