Business, Management and Accounting
4 years ago

Online bookstores increase consumer welfare by over $1 billion annually.

Management Science
Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers
Erik Brynjolfsson, Yu Jeffrey Hu, Michael D. Smith

Paper Summary

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Increased product variety on online bookstores like Amazon significantly boosts consumer welfare by providing a wider selection of books than physical stores. This leads to consumer surplus gains of 731millionto731 million to 731millionto1.03 billion in 2000, which is much larger than the benefits from lower prices due to competition. The ability of online retailers to offer a vast array of products enhances consumer satisfaction and economic value in the digital economy.