Evaluating the Impact of Online Market Integration—Evidence from the EU Portable PC Market

Abstract

We develop a framework to evaluate the impact of market integration, accounting for spillovers between multiple distribution channels. We adapt the standard random coefficients logit demand model to allow for substitution between channels and consumer arbitrage across countries. We apply our framework to the European portable PC market, where geoblocking practices that restrict online cross-border trade have recently been banned. Consumers in high income countries gain most from price convergence, while consumers in other countries may be worse off. The total consumer and welfare gains from online market integration are more modest and mainly due to increased product choice rather than reduced price discrimination. (JEL F13, F14, L13, L63, L81)