Variety-Based Congestion in Online Markets: Evidence from Mobile Apps

Daniel Ershov

American Economic Journal: Microeconomics, 2024, vol. 16, issue 2, 180-203

Abstract: In many online markets, consumers have to spend time and effort browsing through products. The addition of new products could make other products less visible, creating congestion externalities. Using Android app store data, I take advantage of a natural experiment—a redesign of part of the store—to show evidence of congestion externalities online: more apps in the market directly reduce per app usage/downloads. The natural experiment also increases long-run entry, but a structural demand model that accounts for congestion externalities suggests that 40 percent of consumer variety welfare gains are lost from higher congestion.

JEL-codes: D12 D22 D62 L86 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/mic.20200347

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