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Using Internet Retailing for Economic Analysis

If you had access to the proprietary data of, what additional economic questions might you be able to study that you wouldn't with a traditional brick and mortar retailer?

Solution Preview has quickly come to dominate the online payment industry. With only an email address and a password required to send money, is an increasingly popular way to conduct monetary transactions.

Because the Internet works in a fundamentally different way, it permits us to perform research on questions which we could previously only speculate upon. These include the importance of search costs and taxation.

Economists have long known that markets are affected by consumer search costs. The Internet's primary advantage is convenience. For consumer, it offers product descriptions, price comparisons with the click of a mouse, thus increasing market transparency. This dramatically lowers search costs. These are costs incurred by the buyer as he attempts to find the best value. For example, you may want to visit a few stores before you choose the best deal for a particular item. But you probably wouldn't want to visit hundreds. There comes a point where the cost of the search becomes more than the savings you can gain from searching. Economists gain insight into this aspect of shopping by comparing markets with higher and lower search costs. It was difficult, however, to find ...

Solution Summary

How one might use data from Paypal to answer economic problems is determined. The additional economic questions which might be able to study that you wouldn;t with a traditional brick and mortar retailer is determined.