We analyze geographic patterns of trade using transactions data from
eBay and MercadoLibre, two large online auction sites. We find that
distance continues to be an important deterrent to trade between
geographically separated buyers and sellers, though at a lesser extent
than has been observed in studies of non-Internet commerce. We also find
a strong 'home bias' towards trading with counterparties located in the
same city. Further analyses suggest that cultural factors and the
possibility of direct contract enforcement in case of breach are the
main reasons behind the same city bias