Non-User Externalities and Market Power

Leonardo Bursztyn (), Jan Fasnacht (), Rafael Jiménez-Durán (), Aaron Leonard (), Filip Milojević () and Christopher Roth
Additional contact information
Leonardo Bursztyn: University of Chicago & NBER
Jan Fasnacht: Columbia University
Rafael Jiménez-Durán: Bocconi University, IGIER, CESifo & Chicago Booth Stigler Center
Aaron Leonard: University of Chicago
Filip Milojević: University of Chicago

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 creating negative externalities for competing products’ users. We study this mechanism in the smartphone market, analyzing Apple’s strategy of marking messages to Android users with distinctive “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 they were removed. An incentivized deactivation experiment reveals that iPhone users require substantial compensation to have their messages appear as green bubbles on other iPhones. Exploiting uncertainty around the DOJ case against Apple, we show that removing green bubbles shifts choices from iPhone to Android. Finally, we document the prevalence of non-user externalities and analyze their implications across a variety of product features.

Keywords: Non-user utility; Stigma; Market Power; Consumer Welfare; Antitrust. (search for similar items in EconPapers)
JEL-codes: D62 D91 L12 L15 Z13 (search for similar items in EconPapers)
Pages: 142
Date: 2025-04
New Economics Papers: this item is included in nep-com, nep-dcm, nep-exp and nep-reg
References: View references in EconPapers View complete reference list from CitEc
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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_360_2025.pdf Third version, 2026 (application/pdf)

Related works:
Working Paper: Non-User Externalities and Market Power (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ajk:ajkdps:360

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