Article | American Economic Journal: Microeconomics | February 2009

The Geography of Trade in Online Transactions: Evidence from eBay and MercadoLibre

by Ali Hortacsu, Francisco de Asis Martinez-Jerez and Jason Douglas

Abstract

We analyze geographic patterns of trade between individuals using transactions data from eBay and MercadoLibre, two large online auction sites. We find that distance continues to be an important deterrent to trade between geographically separated buyers and sellers, though to a lesser extent than has been observed in studies of non-Internet commerce between business counterparties. We also find a strong "home bias" for trading with counterparties located in the same city. Further analyses suggest that location-specific goods such as opera tickets, cultural factors, and the possibility of direct contract enforcement in case of breach may be the main reasons behind the same-city bias.

Keywords: City; Geographic Location; Market Transactions; Online Technology; Customers; Goods and Commodities; Contracts; Law Enforcement; Auctions; Prejudice and Bias;

Citation:

Hortacsu, Ali, Francisco de Asis Martinez-Jerez, and Jason Douglas. "The Geography of Trade in Online Transactions: Evidence from eBay and MercadoLibre." American Economic Journal: Microeconomics 1, no. 1 (February 2009): 53–74.