Working Paper: NBER ID: w28100
Authors: Jie Bai; Maggie Chen; Jin Liu; Xiaosheng Mu; Daniel Yi Xu
Abstract: We study how search and information frictions shape market dynamics in global e-commerce. Observational data and self-collected quality measures from AliExpress establish the existence of search and information frictions. A randomized experiment that offers new exporters exogenous demand and information shocks demonstrates the potential role of sales accumulation in enhancing seller visibility and overcoming these demand frictions. However, we show theoretically and quantitatively that this demand-reinforcement mechanism is undermined by the large number of online exporters. Our structural model rationalizes the experimental findings and quantifies efficiency gains from reducing the number of inactive sellers.
Keywords: e-commerce; search frictions; information frictions; market dynamics; exporters
JEL Codes: F14; L15; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| past performance (C52) | visibility (Y60) |
| many sellers (D40) | search congestion (L91) |
| search congestion (L91) | allocative efficiency (D61) |
| search congestion (L91) | consumer welfare (D69) |
| search and information frictions (D83) | market allocation towards higher-quality firms (L15) |
| exogenous demand shocks to small exporters (F41) | improved visibility (L15) |
| improved visibility (L15) | sales accumulation (M31) |
| removing noise from review signals (Y30) | market share to higher-quality sellers (L15) |