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Product Variety, Across-Market Demand Heterogeneity, and the Value of Online Retail
2018
Social Science Research Network
This paper quantifies the effect of increased product variety in online markets on consumer welfare and firm profitability. We show the gains may be small if consumer tastes vary geographically and brick-and-mortar stores cater to the local demand. We use an original data set from a large online retailer containing millions of transactions. However, the large choice set leads to many products having zero local market shares. We propose a modification to Berry (1994) and Berry, Levinsohn, Pakes
doi:10.2139/ssrn.3192621
fatcat:hpkogvapazdujfwr4ytd3hzka4