Filling in the gaps: Digital platform economies and the agglomeration of urban consumption amenities
Abstract
The spatial agglomeration of restaurants and retail establishments provides a physical platform for consumers searching for differentiated local goods and services. However, the rapid penetration of digital platforms, such as Yelp and Meituan, has substantially lowered search frictions and fundamentally changed the search behavior of consumers. This paper establishes a directed consumer search model to investigate the impact of the introduction and merger of digital platforms on urban agglomeration and provides empirical evidence with novel datasets on merchant relocation, platform registration, and consumer reviews. It is found that (1) digital platforms drive merchants to locate in cluster locations with lower horizontal and vertical accessibility; (2) digital platforms complement urban agglomerations regarding business density, diversity, and clustering patterns.