Stanford University


Gains from Product Variety: Evidence From a Large Digital Platform

Erik Brynjolfsson
Long Chen
Xijie Gao

NBER, January 2023

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E-commerce sales have grown rapidly worldwide, massively increasing the availability of new products. We examine data from the largest digital platform in China and find that the number of book titles almost doubled, prices fell somewhat, and most new books are sold to consumers with unusual tastes. Demand for these niche products was significantly more inelastic than that of mass products. Embedding the estimates of demand elasticity into a two-segment CES framework, we find the welfare gain from increased variety was about 40 times the gain from lower prices and that rural consumers enjoyed the largest gains.

Stanford University