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Tax Sensitivity and Home State Preferences in Internet Purchasing

  • Glenn Ellison
  • Sara Fisher Ellison

Data on memory modules sales are used to explore aspects of e-retail demand. Aggregate sales are examined in state-level regressions. Discrete choice techniques are used to examine (incomplete) hourly sales data from a price comparison site. We find a strong relationship between e-retail sales to a given state and sales tax rates that apply to purchases from offline retailers, suggesting substantial online-offline substitution and the importance of tax avoidance motives. Geography matters in two ways: consumers prefer purchasing from firms in nearby states and appear to have a separate preference for buying from in-state firms. (JEL D12, H25, H71, L81)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.1.2.53
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File URL: http://www.aeaweb.org/aej/pol/data/2007-0029_data.zip
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Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 1 (2009)
Issue (Month): 2 (August)
Pages: 53-71

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Handle: RePEc:aea:aejpol:v:1:y:2009:i:2:p:53-71
Note: DOI: 10.1257/pol.1.2.53
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  5. Michael R. Baye & John Morgan, 2004. "Price Dispersion in the Lab and on the Internet: Theory and Evidence," Working Papers 2004-02, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  6. Chris Forman & Anindya Ghose & Avi Goldfarb, 2009. "Competition Between Local and Electronic Markets: How the Benefit of Buying Online Depends on Where You Live," Management Science, INFORMS, vol. 55(1), pages 47-57, January.
  7. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
  8. repec:rje:randje:v:37:y:2006:i:4:p:964-982 is not listed on IDEAS
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