Location Divide in Digital Platforms? Evidence from a Natural Experiment

53 Pages Posted: 1 May 2023 Last revised: 27 Mar 2024

See all articles by Lanfei Shi

Lanfei Shi

University of Virginia - McIntire School of Commerce

Raveesh Mayya

New York University (NYU) - Leonard N. Stern School of Business

Shun Ye

George Mason University - Department of Information Systems and Operations Management

Date Written: April 18, 2023

Abstract

This study examines a less investigated information signal—the seller’s location—in digital platforms. We ask whether and how the disclosure of seller location affects the product sales and pricing strategies of international sellers as compared to domestic sellers. We leverage an exogenous policy change on Amazon that mandated all sellers to disclose their business locations to identify whether such an effect is present. Specifically, we exploit the difference between the announcement of the policy change and its actual implementation to also examine potential forward-looking responses from sellers upon the policy announcement. Our analyses reveal that, upon public announcement of the policy (the announcement effect), international sellers proactively adjust their pricing strategies ahead of the policy implementation, leading to sales improvement. However, we observe a sales reversal effect upon the policy implementation (the disclosure effect)—disclosing seller location not only cancels the gain from aggressive pricing for international sellers but also exacerbates their sales gap from their domestic counterparts. The underlying drivers of this preference include consumers’ concerns with shipping/service convenience, as well as implicit location preference. In addition, we provide evidence that the seller’s location is a substitute for the manufacturing location of a product under conditions where implicit location preference exists. These findings highlight the consequences of mandating information disclosure and provide valuable implications for managing global e-commerce platforms.

Keywords: location disclosure, policy change, global e-commerce, digital platforms, information signals, unintended consequences

Suggested Citation

Shi, Lanfei and Mayya, Raveesh and Ye, Shun, Location Divide in Digital Platforms? Evidence from a Natural Experiment (April 18, 2023). George Mason University School of Business Research Paper , Available at SSRN: https://ssrn.com/abstract=4422794 or http://dx.doi.org/10.2139/ssrn.4422794

Lanfei Shi (Contact Author)

University of Virginia - McIntire School of Commerce ( email )

125 Ruppel Dr
Charlottesville, VA 22904-4173
United States

Raveesh Mayya

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Shun Ye

George Mason University - Department of Information Systems and Operations Management ( email )

4400 University Drive
Fairfax, VA 22030
United States

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