When Product Markets Become Collective Traps: The Case of Social Media

Leonardo Bursztyn, Benjamin Handel, Rafael Jiménez-Durán and Christopher Roth

American Economic Review, 2025, vol. 115, issue 12, 4105-36

Abstract: Individuals might experience negative utility from not consuming a popular product. With such externalities to nonusers, standard consumer surplus measures, which take aggregate consumption as given, fail to appropriately capture consumer welfare. We propose an approach to account for these externalities and apply it to estimate consumer welfare from two social media platforms: TikTok and Instagram. Incentivized experiments with college students indicate positive welfare based on the standard measure but negative welfare when accounting for these nonuser externalities. Our findings highlight the existence of product market traps, where active users of a platform prefer it not to exist.

JEL-codes: D62 D83 D91 L82 Z13 (search for similar items in EconPapers)
Date: 2025
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Related works:
Working Paper: When Product Markets Become Collective Traps: The Case of Social Media (2023)
Working Paper: When Product Markets Become Collective Traps: The Case of Social Media (2023)
Working Paper: When Product Markets Become Collective Traps: The Case of Social Media (2023)
Working Paper: When product markets become collective traps: The case of social media (2023)
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DOI: 10.1257/aer.20231468

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