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Is Big Tech Destroying Retail Markets?

When online markets for consumer goods and services first emerged, they were hailed for empowering shoppers, encouraging competition, and reducing transaction costs. But much as changed since then, and if current trends continue, online markets will become markets in name only.

WASHINGTON, DC – Information technology is not just transforming markets; it is also making them ubiquitous, particularly for household consumers. From pretty much anywhere in the world, one can now search out goods and services, compare prices from multiple sellers, and give detailed shipping and delivery instructions, all with a mouse click or a screen tap.

No doubt, this is a dream come true for anyone who grew up shopping in real, hands-on markets, with sellers displaying their wares on store shelves, on public squares, or along dusty roads. In many cases, routine purchases required long waits or extensive bargaining. But with online markets, savings are generated in many dimensions, and transaction costs are sharply reduced at all stages of the process.

Online markets have the potential to improve consumer welfare substantially, by fueling competition on price, efficiency, and customer experience, whether through search engines or single platforms such as Amazon. And if consumers spend smaller shares of their disposable income on each purchase they make, they will have room to consume more, thus boosting overall economic activity.

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