Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, January 14, 2020

The Impact of E-Commerce on Relative Prices and Consumer Welfare

Yoon J. Jo, Misaki Matsumura, David E. Weinstein examine The Impact of E-Commerce on Relative Prices and Consumer Welfare.

ABSTRACT: This paper examines the impact of e-commerce on pricing behavior and welfare. Using Japanese data, we find that the entry of e-commerce firms significantly raised the rate of intercity price convergence for goods sold intensively online, but not for other goods. E-commerce also lowered relative inflation rates for goods sold intensively online. We overcome data challenges using long data series and historical catalog sales as an instrument for e-commerce sales intensity. We estimate that reductions in price dispersion raised welfare by 0.3 percent. E-commerce also lowered variety-adjusted prices on average by 0.9 percent, and more in cities with highly educated populations.

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