Search and Information Frictions on Global E-Commerce Platforms: Evidence from AliExpress

59 Pages Posted: 25 Nov 2020

See all articles by Jie Bai

Jie Bai

Harvard University - Harvard Kennedy School (HKS)

Maggie Xiaoyang Chen

George Washington University

Jin Liu

New York University (NYU) - New York University

Daniel Yi Xu

Duke University

Multiple version iconThere are 2 versions of this paper

Date Written: November 2020

Abstract


Global e-commerce platforms present new export opportunities for small and medium-sized
enterprises in developing countries by significantly lowering the entry barriers of exporting.
However, the lack of market selection can lead to a large number of online rms competing for
consumers’ attention, resulting in severe congestion in consumers’ search process. When firms’
intrinsic quality is not perfectly observed, these search frictions can further slow down the
resolution of the information problem and hinder market allocation towards better rms. In this
paper, we investigate how search and information frictions shape rm dynamics and market
evolution in global e-commerce. Using detailed data from AliEpxress as well as a rich set of self-
collected objective quality measures, we provide stylized facts that are consistent with the
presence of search and information frictions. Moreover, using a randomized experiment that
offers exogenous demand and information shocks to small prospective exporters, we establish
that firms with larger past sales have an advantage in overcoming the search friction and
generating future orders. This indicates that initial demand shocks could confound firms’ true
quality in determining firm growth and the long-run market structure. We construct and estimate
an empirical model of the online market that are consistent with our descriptive and experimental
findings and use the model to quantify the extent of demand-side frictions. Counterfactual
analyses show that alleviating information frictions and reducing the number of firms can help to
improve allocative efficiency and raise consumer welfare.

JEL Classification: F14,L15,O12

Suggested Citation

Bai, Jie and Chen, Maggie Xiaoyang and Liu, Jin and Yi Xu, Daniel, Search and Information Frictions on Global E-Commerce Platforms: Evidence from AliExpress (November 2020). HKS Working Paper No. RWP20-037, Available at SSRN: https://ssrn.com/abstract=3736925 or http://dx.doi.org/10.2139/ssrn.3736925

Jie Bai (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Maggie Xiaoyang Chen

George Washington University ( email )

710 21st Street NW
Washington, DC 20052
United States

Jin Liu

New York University (NYU) - New York University

Daniel Yi Xu

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
26
Abstract Views
202
PlumX Metrics