DP15031 Are Online Markets More Integrated than Traditional Markets? Evidence from Consumer Electronics

Author(s): Nestor Duch-Browne, Lukasz Grzybowski, André Romahn, Frank Verboven
Publication Date: July 2020
Keyword(s): difference-in-difference convergence, E-commerce, international price convergence, International price differences, market integration
JEL(s): L13, L68, L86
Programme Areas: Industrial Organization, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15031

Did the Internet make international markets more integrated? To address this question, we study long-term international price differences and their speed of convergence, based on a unique data base for identical goods sold in both online and traditional "brick-and-mortar'' distribution channels, covering ten European countries. We find that long-term international price differences are closely comparable between both distribution channels. Furthermore, international price differences converge only slightly faster online than offline, and the differences in the international price differences between online and offline converge at a very fast rate. Finally, regardless of the distribution channel, long-term price differences are lower and converge faster within the same currency union. Our findings imply that online markets are currently not more integrated than traditional markets.