Location Divide in Digital Platforms? Evidence from a Natural Experiment

This study examines a less investigated information signal—the seller’s location—in digital platforms. We ask whether and how the disclosure of seller location affects sellers’ product sales and pricing strategies. We identify such effects by leveraging an exogenous policy change on Amazon that mandated all sellers to disclose their business locations in its U.S. market. We further exploit the difference between the announcement of the policy change and its actual implementation to examine potential forward-looking responses from sellers upon the policy announcement. Our analyses reveal that, upon public announcement of the policy, sellers proactively adjust their pricing strategies ahead of the policy implementation, leading to sales improvement by 4.5%. However, we observe a sales reversal effect upon the policy implementation—disclosing seller location not only cancels the gain from aggressive pricing by sellers in the treated U.S. market but also exacerbates their sales gap from their counterparts in the control UK market. A deep dive into the U.S. market reveals that it is the international sellers who are negatively affected by the location disclosure policy, due to consumer preference towards domestic sellers. The underlying drivers of this preference are consumers’ concerns with shipping and service convenience, as well as implicit location preference. The research shows that the seller location disclosure policy may create a competitive disadvantage for international sellers, leading to a location divide on global e-commerce platforms. These findings highlight the unintended consequences of information disclosure and provide valuable implications for managing global e-commerce platforms