Abstract
This paper examines the effect of the number of sellers of a good on buyers’ demand, using an extensive dataset from an e-commerce platform (PriceMinister.com) in France. Accounting for seller and product characteristics constitutes variety amongst the same product. Although buyers may prefer a wide variety, it can introduce a search cost. Using a flexible semiparametric specification, I find that the demand of buyers does not monotonically increase in relation to the number of sellers (variety), contrary to assumptions in the literature. I illustrate the consequences of misspecification of these network effects through a counterfactual simulation.
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