Tuesday, August 12, 2014
Nestor Duch-Brown (European Commission – JRC - IPTS) and Bertin Martens (European Commission – JRC - IPTS) write on Consumer benefits from the EU Digital Single Market: evidence from household appliances markets.
ABSTRACT: This paper investigates price differences between online and offline retail channels in the EU Digital Single Market. Using price and sales data for ten different product categories sold both offline and online in 21 EU countries in 2009, and correcting for product characteristics, we find evidence that confirms the theory: online prices are lower than offline prices, price dispersion also tends to be lower online and online demand is more price-elastic than offline demand. In addition, from our demand estimates we compute the consumers' welfare effects of different scenarios. Our results indicate that a full price convergence across EU member states towards the lowest observed average price would significantly benefit consumers. Moreover, eliminating e-commerce would reduce consumer surplus in €34 billion while an increase in online sales between 10% and 25% would represent a change in consumer welfare in the range of! €3.4 billion to €13 billion.