Digital Platform Consolidation and Offline Expansion: Strategic Convergence and Market Welfare in China's Second-hand Real Estate Market

TL;DR

This paper examines how offline expansion and platform consolidation in China's second-hand real estate market influence transaction volumes, prices, and market efficiency, showing that these strategies improve competitiveness and welfare over time.

Contribution

It provides empirical evidence on the effects of offline store entry and platform consolidation on market dynamics and welfare in China's real estate sector.

Findings

Offline store entry increases transaction volume by 9-10%.

Platform consolidation leads to persistent transaction growth of 5-6%.

Both strategies reduce price concessions and enhance market efficiency.

Abstract

This study analyzes the impact of offline expansion and online platform consolidation in China's second-hand real estate market. Using micro-level transaction data and difference-in-differences estimations, we find offline store entry significantly boosts transaction volumes (9-10\%) and reduces price concessions (1\%) initially, though effects diminish over time. Platform consolidation via Lianjia's Agent Cooperation Network yields delayed yet persistent transaction volume increases (5-6\%), particularly in less concentrated markets, and consistently lowers price concessions. These strategies sustainably enhance brokerage competitiveness, bargaining power, and market welfare, despite increased market concentration, ultimately benefiting sellers and improving overall efficiency.