When Competition Needs Awareness: Regulating Social Media with Naive Users

Martino Banchio, Francesco Decarolis, Carl-Christian Groh, Jiménez-Durán, Rafael and Miguel Risco

No 21678, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Can intensifying competition protect social media users? The answer depends on users’ awareness of the harms of social media content. We develop a model of asymmetric competition between platforms with naive users, in which platforms choose how much to amplify harmful yet engaging content. Naive users do not internalize the adverse effects of consuming this content. Reducing a dominant platform’s competitive advantage benefits users only if the platform prioritizes attracting rational users. Otherwise, intensifying competition can backfire by inducing this platform to exploit naive users. Awareness initiatives complement competition policy by making exploitation less attractive, but may increase market concentration.

Keywords: Contestability (search for similar items in EconPapers)
JEL-codes: D18 D21 D63 L51 (search for similar items in EconPapers)
Date: 2026-06
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