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More Is Better, Or Not? An Empirical Analysis of Buyer Preferences for Variety on the E-Market

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  • Sokullu, Senay

Abstract

This paper examines the effect of the number of sellers of a good on buyers’ demand, using an extensive dataset from an e-commerce platform (PriceMinister.com) in France. Accounting for seller and product characteristics constitutes variety amongst the same product. Although buyers may prefer a wide variety, it can introduce a search cost. Using a flexible semiparametric specification, I find that the demand of buyers does not monotonically increase in relation to the number of sellers (variety), contrary to assumptions in the literature. I illustrate the consequences of misspecification of these network effects through a counterfactual simulation.

Suggested Citation

  • Sokullu, Senay, 2023. "More Is Better, Or Not? An Empirical Analysis of Buyer Preferences for Variety on the E-Market," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 450-470.
    • Handle: RePEc:eee:jeborg:v:209:y:2023:i:c:p:450-470
    DOI: 10.1016/j.jebo.2023.03.022
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    More about this item

    Keywords

    Nonparametric IV regression; Two-Sided markets; E-Commerce; Online platforms;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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