Internet Rising, Prices Falling

InternetRising,PricesFalling: MeasuringInflationinaWorldofE-Commerce AustanD.GoolsbeeandPeterJ.Klenow∗ May18,2018 Abstract We use Adobe Analytics data on online transactions for millions of products in many different categories from 2014 to 2017 to shed light on how online inflation compares to overall inflation, and to gauge the magnitude of new product bias online. The Adobe data contain transaction prices and quantities purchased. We estimate that online inflation was about 1 percentage point lower than in the CPI for the same categories from 2014–2017. In addition, the rising variety of products sold online, implies roughly 2 percentage points lower inflation than in a matchedmodel/CPI-styleindex. ∗Goolsbee: University of Chicago Booth School of Business, Chicago IL 60637, and NBER,[email protected]. Klenow: Department of Economics, Stanford University, Stanford,CA94305,andNBER,[email protected]. MathiasJimenezandMatteoLeombroni provided superb research assistance; Alberto Cavallo, Charles Hulten, and Leonard Nakamura helpful comments; and Luis Maykot and Siddharth Kulkarni assistance in accessing and understanding the Adobe data. Goolsbee thanks the Initiative on Global Markets at the University of Chicago Booth School of Business for financial support. Klenow is grateful to the StanfordInstitute for EconomicPolicyResearchforfinancialsupport. Thisisamoreexpansive versionofanAEAPapersandProceedingspaper. 1