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The effect of geographical distance on online transactions: Evidence from the Netherlands

Author

Listed:
  • Ali Palali
  • Bas Straathof
  • Rinske Windig

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

The rise of online trade alters the role of distance between (potential) buyers and sellers. We use data from eBay subsidiary Marktplaats.nl, one of the largest online trading platforms in the Netherlands, to estimate how distance affects the probability of a transaction between small geographical regions. We find that distance negatively and modestly affects the probability of having a transaction between two regions, and that the distribution of this probability is highly skewed: ranging from a change of 0.000 to -0.008 percentage points per marginal kilometer. The unconditional probability of a transaction is 27 percent. Distance is less influential for: advertisements with more photos advertisements placed by high-frequency advertisers for new goods in comparison to second hand goods. This suggests that information frictions might be the driving force behind the distance effect on online trade in the Netherlands.

Suggested Citation

  • Ali Palali & Bas Straathof & Rinske Windig, 2017. "The effect of geographical distance on online transactions: Evidence from the Netherlands," CPB Discussion Paper 362, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:362
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    References listed on IDEAS

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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