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The death of physical distance: An economic analysis of the emergence of electronic marketplaces

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  • Young Jun Choi
  • Chung Suk Suh

Abstract

This article studies the impact of the death of geographical distance brought about by e-marketplaces on market equilibrium and social welfare. A partial equilibrium model for an economy with and without e-marketplaces is developed. It is shown that e-marketplaces lower the price level and improve consumers' welfare, thus generating a sufficient condition under which e-marketplaces improve social welfare. An optimal rate of sales tax on transactions through e-marketplaces is derived. Copyright RSAI 2005.

Suggested Citation

  • Young Jun Choi & Chung Suk Suh, 2005. "The death of physical distance: An economic analysis of the emergence of electronic marketplaces," Papers in Regional Science, Wiley Blackwell, vol. 84(4), pages 597-614, November.
  • Handle: RePEc:bla:presci:v:84:y:2005:i:4:p:597-614
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    Cited by:

    1. Fabrice Rochelandet & Silvio H. T. Tai, 2016. "Do privacy laws affect the location decisions of internet firms? Evidence for privacy havens," European Journal of Law and Economics, Springer, vol. 42(2), pages 339-368, October.
    2. Rach, Sabine & Tschöpel, Michael, 2011. "Handelsplattformen im Internet: Eine Literaturstudie zur empirischen Evidenz," Arbeitspapiere 112, University of Münster, Institute for Cooperatives.

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