Non-User Utility and Market Power: The Case of Smartphones

Leonardo Bursztyn (), Rafael Jiménez-Durán (), Aaron Leonard (), Filip Milojević () and Christopher Roth ()
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Leonardo Bursztyn: University of Chicago & NBER
Rafael Jiménez-Durán: Bocconi University, IGIER & Chicago Booth Stigler Center
Aaron Leonard: University of Chicago
Filip Milojević: University of Chicago
Christopher Roth: University of Cologne, NHH, Max Planck Institute for Research on Collective Goods, IZA & CEPR

No 360, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: Firms can increase the demand for their products and consolidate their market power by increasing their users’ utility but also by strategically decreasing the utility of competing products’ users. We study this mechanism in the smartphone market, analyzing Apple’s strategy of differentiating messages sent to Androids with “green bubbles.” In surveys with U.S. college students, we show that green bubbles are widely stigmatized and that a majority of both iPhone and Android users would prefer green bubbles to no longer exist. An incentivized deactivation experiment reveals that iPhone users have a significant willingness to pay to prevent their messages from appearing as green bubbles on other iPhones. Finally, we examine the market implications and document that removing green bubbles substantially increases respondents’ likelihood of choosing an Android over an iPhone.

Keywords: Non-user utility; Stigma; Market Power; Consumer Welfare; Anti-trust. (search for similar items in EconPapers)
JEL-codes: D83 D91 J15 P16 (search for similar items in EconPapers)
Pages: 63
Date: 2025-04
New Economics Papers: this item is included in nep-com, nep-dcm, nep-exp and nep-reg
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