Abstract
In this paper we apply a gravity framework to user-generated data of a large online housing market platform. We show that gravity describes the patterns of inflow and outflow of hits (mouse clicks, etc.) from one municipality to another, where the municipality of the user defines the origin and the municipality of the property that is viewed defines the destination. By distinguishing serious searchers from recreational searchers we demonstrate that the gravity framework describes geographic search patterns of both types of users. The results indicate that recreational search is centered more around the user’s location than serious search. However, this finding is driven entirely by differences in border effects as there is no difference in the distance effect. By demonstrating that geographic search patterns of both serious and recreational searchers are explained by their physical locations, we present clear evidence that physical location is an important determinant of economic behavior in the virtual realm too.
Highlights
Online housing platforms have come to play an important role in housing search
Our research demonstrates that the gravity framework can successfully be applied to housing search of both serious and recreational searchers
We demonstrate that even a naive gravity model explains close to 80 percent of all flows
Summary
Online housing platforms have come to play an important role in housing search. It has led to novel user-generated data, which can be used to analyze online search strategies. Lendle et al [4] use eBay data to study the effect of distance on international trade flows. Lendle et al [4] argue that the Internet facilitates a reduction in search costs and that online marketplaces, such as eBay, can be considered frictionless in this respect They argue that ‘information frictions’ remain and that these drive the distance effect of eBay trades. Following work of Rauch [7], Dasgupta and Mondria [8] present a model that uses information frictions, the costs of processing information, to explain traditional trade flows between countries. Even the simplest of gravity models, with only mass, distance, and border variables, explains close to 80 percent of the bilateral flows— even when no distinction is made between serious and recreational searchers.
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