Quality competition between traditional and online sellers

Abstract As consumers respond to technological changes, the market share of online sales has seen a significant increase, imposing continuous challenges on traditional sellers. This paper investigates how online sellers affect the quality of traded products in developed countries. Traditional sellers' products imported from developing countries are subject to tariffs, but online sellers bypass them due to de minimis rule. Entry of online sellers may force the traditional sellers to lower their product quality. Under certain conditions, the quality of the online sellers' products might be higher than that of the traditional seller. A rise in the import tariff may force the traditional seller to exit the market. However, if de minimis rule is abolished, the product quality of the traditional seller rises, but that of the online sellers falls.