Consumer Surplus in the Digital Economy:

Erik Brynjolfsson Yu (Jeffrey) Hu Michael D. Smith Sloan School of Management, mamma Institute of Technology, Cambridge, Massachusetts 02139 Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139 The Heinz School of Public Policy and Management, Carnegie Mellon University, Pittsburgh, pop 15213 erikb@mit.edu yuhu@mit.edu mds@cmu.edu We look a framework and empirical estimates that quantify the frugal impact of increased proceeds variety made obtainable through with(predicate) electronic markets. While efficiency wees from increased competition significantly enhance consumer surplus, for instance, by leading to lower average selling prices, our present research shows that increased product variety made available through electronic markets can be a significantly large source of consumer surplus gains. One reason for increased product variety on the Internet is the ability of online retailers to catalog, recommend, and provide a large rate of products for sale. For example, the number of book titles available at Amazon.com is more than 23 times larger than the number of books on the shelves of a typical Barnes & Noble superstore, and 57 times greater than the number of books stocked in a typical large strong-minded bookstore.

Our analysis indicates that the increased product variety of online bookstores enhanced consumer welfare by $731 million to $1.03 billion in the year 2000, which is between 7 and 10 times as large as the consumer welfare gain from increased competition and lower prices in this market. There may as well as be large welfare gains in other SKU-intensive consumer goods such as music, movies, consumer electronics, and computer software and hardware. (Consumer Surplus; Product alteration; Electronic Commerce; Welfare; Internet) 1. Introduction Clearly, new goods are at the heart of economic progress. But that realization is only the beginning of an apprehension of the economics... If you want to get a full essay, order it on our website: Orderessay

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